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WHOM  TO  TRUST: 


A  PRACTICAL  TREATISE 


ON 


MERCANTILE  CREDITS. 


BY   P.   R.   EARLING, 

It 

OF  L.  GOULD  &  Co., 


CHICAGO. 


CHICAGO   AND   NEW   YORK: 

RAND,  MCNALLY  &  COMPANY,  PUBLISHERS. 

1890. 


SPRECKt 

V 


COPYRIGHT,  1889,  BY  RAND,  MCNALLY  &  Co. 


Trust. 


THIS  TREATISE   IS  DEDICATED 

BY  THE  AUTHOR, 
TO   HIS  FRIENDS  AND  ASSOCIATES  IN  BUSINESS, 

L.  GOULD  AND  FRANK  GOULD, 

AS  EMBODYING  THE  PRINCIPLES  AND  METHODS  ADOPTED 
AND  UNIFORMLY  ADHERED    TO    BY  THEM,    THROUGH- 
OUT A  LONG  AND   SUCCESSFUL  BUSINESS  CAREER. 


111710 


CONTENTS. 


INTRODUCTORY. 

PAGE. 

INTRODUCTION      _                   .  .    11 

WHOM  IT  CONCERNS    .  15 
THE  IMPORTANCE  OP  A  KNOWLEDGE  OF  CREDITS     .        _    18 

LOSSES  BY  FAILURES           _  23 

MERCANTILE  REPORTS    ...  -    29 

ANALYTICAL. 

ANALYSIS  OF  STATEMENTS  OR  REPORTS      .  -    84 

NATURE  OF  THE  BUSINESS            .          _  41 

LOCALITY    _                                         .  .45 

CHARACTER  AND  HABITS    _                     .  52 

ABILITY      _                    _                               _  .55 

EXPERIENCE     _  60 

APPLICATION  AND  INDUSTRY    .                     .  .64 

BUSINESS  EDUCATION          -  68 

HONESTY     _                               .  -    72 

ECONOMY  .                   77 

MARRIED  OR  SINGLE      _  -    83 

AGE        .                                                    -  86 

CAPITAL     .                                          .  .89 

ASSETS:    STOCK  AND  PERSONAL  PROPERTY  .                    94 

ASSETS:    ACCOUNTS  AND  BILLS  RECEIVABLE  .          _    98 

REAL  ESTATE — EXEMPTIONS          _  103 

LIABILITIES           _  -  106 
VOLUME  OF  BUSINESS  IN  PROPORTION  TO  CAPITAL  .        110 

ANTECEDENTS       .                                         -  .115' 

COMPETITION   .  _        118 

O) 


10  CONTENTS. 

PAGE. 

PUNCTUALITY        .  .  122 

PRODUCTIVE  OR  NON-PRODUCTIVE  _          _        127 

DOING  BUSINESS  AS  AGENTS    _          .  .  130 

PARTNERSHIPS                                          .  .134 

DOUBTFUL  CREDITS        _                    _  _  139 
JOINT-STOCK  AND  COOPERATIVE  ASSOCIATIONS          .        142 

WOMEN  IN  TRADE                                       .  _  148 

CHATTEL  MORTGAGES  AND  OTHER  LIENS  .          _        153 

INSURANCE            _  _  157 

MISCELLANEOUS  INFORMATION     -         -  .          _        161 

OLD  CUSTOMERS  _                               .  167 

LIMIT  OF  CREDIT      _  .          .        171 

MERCANTILE  REPORTS  ANALYZED,    _  _  174 

CREDIT:  A  RISK        .  n_        200 

FACTS  IN  GENERAL. 

INVENTORY  VALUATIONS                    _  _  202 

PAST-DUE  ACCOUNTS  _                   _  .        209 

COLLECTIONS         .                    .  _             215 

COLLECTIONS:    METHODS  EMPLOYED      _  _        220 

SHARP  COLLECTORS        .  _  224 

REFERENCES    .  228 

COMMERCIAL  TRAVELERS         .  .          -  236 

PERSONAL  INTERVIEWS  vs.  REPORTS     _  _        241 

CHRONIC  BORROWERS    .  .             244 

DEBT  vs   INDEPENDENCE    _  _        248 

COMPROMISES  AND  EXTENSIONS  _  254 

CREDIT:    HISTORY  OF  -        260 

CREDIT  SYSTEM    _                     .  _  268 
CREDIT:    ITS  RELATION  TO  CAPITAL  AND  LABOR     .        281 

HISTORY  OF  THE  MERCANTILE  AGENCY  ,  295 


INTRODUCTION. 

This  treatise  on  "Mercantile  Credits"  is  the 
outgrowth  of  frequent  requests  on  the  part  of 
business  friends  of  the  writer  to  give  them  the 
benefit  of  his  experience  "in  making  credits," 
so  far,  at  least,  as  that  might  be  possible  in  a 
very  condensed  form,  and  by  laying  down  and 
illustrating  a  few  fundamental  principles.  An 
analysis,  however,  of  the  subject  showed  that  a 
few  off-hand  rules  and  directions  on  "when 
and  when  not  to  make  credits"  would  be  inad- 
equate, if  not  quite  useless,  since  in  no  two 
applications  for  credit  are  the  conditions  the 
same.  In  the  attempt,  then,  to  be  of  service 
even  to  a  few  personal  friends,  it  was  found 
necessary  to  treat  the  subject  in  a  comprehen- 
sive manner,  and  although  this  involved  the 
systematic  and  consecutive  arrangement  and 
assimilation  of  avast  quantity  of  material,  and 
a  close  scrutiny  of  its  relationship,  the  task  was, 
nevertheless,  deemed  worthy  the  effort. 

No  apology  for  presenting  this  volume  to  the 
public  is  offered.  But  several  valid  reasons  can 
be  pointed  out  for  its  publication.  The  first 
reason  is,  that  a  better  knowledge  than  is  gener- 
ally possessed  of  this  subject  is  of  the  utmost  im- 
(ii) 


12  WHOM  TO  TRUST. 

portance  to  the  business  interests  of  the  country 
at  large  and  to  individual  welfare  in  particular. 
Secondly,  the  total  absence  of  literature  and 
lack  of  information  on  a  topic  of  such  vital  im- 
portance to  every  man  engaged  in  business, 
would  seem  to  justify  an  effort  to  supply  so 
palpable  a  deficiency.  Thirdly,  that  the  ex- 
perience and  knowledge  of  one  who  has  devoted 
a  life-time  to  the  management  of  "credits "  in 
both  mercantile  and  manufacturing  business, 
can  hardly  fail  of  being  beneficial,  when  made 
available  to  those  less  practiced  in  this  special 
vocation. 

The  principles  and  rules  laid  down  in  the  fol- 
lowing pages  for  determining  credit  are  such  as 
have  governed  the  writer  in  his  own  practice. 
Close  observation  of  causes,  and  their  natural 
and  probable  effects,  has  made  it  possible  to 
establish  certain  standards,  more  or  less  fixed, 
for  our  guidance  in  all  departments  of  business. 

No  new  system  or  better  methods  than  those 
used  by  many  other  credit  managers  is  claimed. 
In  the  absence,  as  we  have  said,  of  any  pub- 
lished work,  the  aim  has  been  simply  to  give  the 
conclusions  of  a  long  and  active  experience,  in 
the  best  and  most  intelligible  manner  possible 
to  the  writer.  As  the  "proof  of  the  pudding  is 
in  the  eating,"  the  merit  of  the  rules  here  given 
may  be  fairly  judged  by  the  results  obtained  in 
their  daily  application;  and  these,  were  it  per- 
missible to  give  them,  would  be  a  sufficient  in- 


INTRODUCTION.  13 

dorsement.  This  much  may  be  said,  that  the 
percentage  of  losses  sustained  by  houses  in  gen- 
eral is  by  far  too  large,  and  that  a  better  un- 
derstanding of  the  ' '  Science  of  Credits ' '  would 
inure  largely  to  the  benefit  of  the  business 
community  and  save  it  millions  of  dollars  an- 
nually. 

The  subject-matter  has  been  strictly  confined 
to  the  text,  viz.:  Credits.  Every  chapter  has 
been  prepared  with  special  reference  to  that 
topic  only;  but,  incidentally,  the  treatise  will 
be  found  to  cover  the  fundamental  principles 
underlying  business  in  general,  by  pointing  out 
the  causes  that  lead  to  success  or  failure.  We 
may  accept  it  as  an  axiom,  that  when  an  appli- 
cant for  credit  satisfies  the  standard  of  our 
requirements,  we  may  rightfully  infer  that  all 
the  essential  qualifications  of  a  safe  and  good 
business-man  are  also  possessed  by  him. 

No  eifort  has  been  made  to  treat  this  subject 
from  the  standpoint  of  theory  or  political 
economy.  Intended,  as  this  treatise  is,  for  busi- 
ness-men and  for  practical  use,  it  has  been  pre- 
pared as  concisely  as  possible,  and  to  the  point- 
— that  point  being,  "How  to  make  Credits."  * 

*  Among  business-men  the  term  Credits  is  understood  to 
refer  to  the  practical  functions  of  credit  as  between  buyer  and 
seller,  and  in  this  restrictive  sense  the  word  has  been  adopted, 
in  contradistinction  to  the  broader  term  of  Credit. 

In  speaking  of  the  credit-man  throughout  this  book,  it  will 
be  understood  that  all  persons  are  meant  who  make  sales  on 
time,  or  depend  on  the  future  fulfillment  of  contracts. 


WHOM  IT  C01STCEENS. 

This  work  concerns  and  is  of  paramount  im- 
portance to  every  man  engaged  in  trade,  of 
whatever  kind  it  may  be,  but  is  of  special  in- 
terest to  the  merchant  and  manufacturer  doing 
necessarily  a  large  credit  business. 

It  concerns  bookkeepers,  cashiers,  and  ac- 
countants, upon  whom  devolves  the  duty  of 
making  credits  in  the  absence  of  the  regular 
"  Credit  Department,"  found  only  in  the  larger 
houses. 

It  concerns  every  young  man  or  boy  who  con- 
templates entering  mercantile  life,  and  the 
information  it  contains  will  be  found  of  great 
value  in  whatever  position  he  may  occupy.  In 
this  country  every  boy  is  a  possible  merchant 
or  manufacturer,  and  he  can  not  afford  to  neg- 
lect this  branch  of  his  business  education. 

It  concerns  every  banker,  for  a  knowledge  of 
the  elements  and  conditions  requisite  to  success 
in  his  customer  and  debtor  is  of  great  import- 
ance. A  large  proportion  of  the  loans  and  dis- 
counts of  banks  are  made,  not  on  securities 
actually  deposited,  but  on  the  confidence  felt 
in  the  borrower's  methods  of  doing  business,  his 
standing  in  the  community,  and  faith  in  the 

(13) 


16  WHOM   TO  TRUST. 

successful  management  of  his  undertakings. 
And  that  the  Banker's  confidence  may  not  be 
misplaced,  it  is  essential  that  he  make  himself  a 
competent  judge  of  what  constitutes  favorable 
or  unfavorable  conditions  in  the  merchant  or 
manufacturer  to  whom  he  lends  his  funds. 

It  concerns,  also,  lawyers,  especially  when 
acting  in  the  capacity  of  attorneys  for  creditors. 
The  wisdom  and  safety  of  their  recommenda- 
tions to  their  clients  for  further  time  and  indul- 
gence, in  behalf  of  the  debtor,  will  depend  upon 
the  attorney's  knowledge  of  business  affairs  and 
of  what  constitutes  safetj^;  i.  e.,  he  should  be 
governed  in  his  estimate  of  property  and  assets 
by  the  same  rules  that  govern  and  enable  the 
business-man  to  determine  questions  of  like 
character. 

It  concerns  every  man  in  and  out  of  trade. 
Professional  men,  and  men  in  all  walks  of  life 
can  profit  by  its  careful  perusal.  It  is  not  ex- 
pected that  this  volume  will  be  all-sufficient  in 
itself,  but  it  will  at  least  furnish  the  funda- 
mental principles,  and  the  processes  of  reason- 
ing employed  in  determining  questions  of 
credit. 

It  concerns  the  man  out  of  business  to-day, 
for  to-morrow  he  may  engage  or  re-engage  in  it; 
in  short,  as  we  are  a  nation  of  traders,  and  more 
credit  business  is  done  in  this  country  than  in 
any  other,  it  behooves  every  man  to  know  all 
that  can  be  learned  on  this  subject. 


WHOM  IT  CONCERNS.  17 

It  concerns,  lastly,  but  not  least,  every  com- 
mercial traveler,  and  should  be  carefully  read 
and  studied  by  Mm,  that  he  may  make  himself  a 
competent  judge  of  ' '  Credits. ' '  A  large  percent- 
age of  the  credits  given  are  made  on  his  judgment 
and  recommendation.  Some  agents'  opinions 
are  entirely  relied  on  by  their  respective  houses, 
but  the  majority  of  them  are  not  good  "  Credit 
men."  Their  eagerness  to  make  a  record  as 
salesmen  transcends  all  other  considerations. 
Having  been  a  traveling  man  myself  at  one 
period  of  my  commercial  life,  I  know  from  per- 
sonal experience  why  so  many  fail  in  gaining 
the  confidence  of  their  firms  in  this  capacity. 
An  agent's  recommendation  for  credit  should 
be  sufficient,  and  his  firm  should  feel  warranted 
in  accepting  his  judgment.  Where  this  is  the 
case,  the  firm  has  gained  a  valuable  co-worker, 
and  the  agent  a  strong  foothold.  To  sell  is  one 
thing;  to  "get  our  pay"  is  of  infinitely  greater 
importance. 


18  WHOM   TO   TRUST, 


IMPORTANCE    OF    A   KNOWLEDGE    OF 
"CREDITS." 

When  we  speak  of  commerce  and  trade,  we 
are  met  by  the  question  of  their  existence  in  a 
general  way.  There  is  suggested,  their  volume, 
influence  of  their  relations  on  the  world,  and 
our  collective  welfare.  Considering  the  subject 
from  this  standpoint,  we  are  apt  to  be  led  to  its 
theoretical  considerations;  that  is,  its  civilizing, 
educational,  and  social  influences,  and  to  the 
student  of  political  economy  these  offer  a  vast 
and  most  important  field  for  thought  and  in- 
vestigation. But  these  problems  do  not  concern 
us  here.  We  have  to  do  with  the  practical 
affairs  of  life,  and  the  question  of  trade  being 
one  of  ' i  bread  and  butter, ' '  no  more  serious 
issue  could  present  itself. 

Buying  and  selling  constitute  trade.  If  the 
transactions  were  all  for  cash,  our  success  as 
merchants  would  simply  be  a  question  of  who 
could  buy  and  sell  the  most,  and  to  the  best  ad- 
vantage, and  there  would  be  no  occasion  for 
the  exercise  of  our  faculties  except  in  buying 
and  selling. 

But  what  confronts  us  right  here?  It  is  the 
question  of  credit.  As  a  matter  of  fact  we  do 
not  do  business  for  cash.  We  do  it  on  credit 
almost  wholly,  and  this  radically  changes  the 
problem.  Long  and  common  usage,  expediency, 


19 

our  spirit  of  enterprise,  and  our  extraordinary 
confidence  in  each  other,  have  established  the 
custom  of  parting  with  our  property  on  prom- 
ises of  future  payment,  and  after  once  parting 
with  it,  we  hold  as  a  substitute,  written  or  ver- 
bal, the  buyer's  promise  to  pay,  and  that  is  all. 
The  discharge  of  this  promise  rests  on  the  buy- 
er's  honesty,  ability,  experience,  and  a  multi- 
tude of  other  factors.  If  the  buyer  is  honest, 
our  safety  depends,  mainly,  on  his  success,  and 
this,  again,  is  dependent  on  his  qualifications 
and  circumstances  over  which  he  may  or  may 
not  be  able  to  exercise  control. 

The  practical  and  all -important  questions 
then  are,  to  make  sure  of  our  payment  when 
due,  and  that  the  men  we  sell  to  are  both  will- 
ing and  able  to  do '"as  they  agree.  The  ability 
to  sell  the  most  goods  and  do  the  largest  busi- 
ness, does  not  in  itself  determine  a  man' s  suc- 
cess; in  fact,  observation  proves  that  this  is 
often  done  unwisely  and  against  his  best  in- 
terests. 

Commerce  and  credit  are  inseparable.  They 
are  not  only  inseparable,  but  a  judicious  exer- 
cise of  credit-giving  is  the  more  important  of 
the  two.  Before  delivering  our  goods  to  an- 
other's custody,  our  first  concern  must  be  the 
reliability  of  the  custodian  or  buyer,  and  the 
probability  of  getting  our  money,  and  with  it 
our  profit,  which  is  the  sole  object  of  doing 
business.  This  being  decided,  pro  or  con,  we 


20  WHOM  TO   TEUST. 

then  make  or  do  not  make  the  sale.  This  proves 
our  position — that  our  ability  as  judges,  when 
to  sell  and  when  not,  comes  first  in  importance, 
and  that  of  salesmen  comes  second. 

Practically,  credit  is  incidental  to  trade, 
and  in  our  daily  transactions  the  major  part 
of  trade  is  done  on  credit;  i.  e.,  it  is  dependent 
on  our  confidence  in  the  buyer;  but  blind  con- 
fidence is  not  meant,  nor  will  it  answer.  Our 
faith  in  men  must  result  from  the  exercise  of 
good  judgment,  large  experience,  a  knowledge 
of  men  and  things,  and  their  fitness  to  each 
other.  Is  our  confidence  justifiable  in  any 
given  case?  That  is  the  question.  That  it 
very  often  is  not,  we  have  learned  to  our  sor- 
row. 

As  above  stated,  in  no  country  is  credit  so 
generally  and  so  lavishly  given  as  in  this.  Our 
whole  commercial  fabric  rests  on  it.  Every  in- 
dividual welfare,  to  a  greater  or  less  extent, 
depends  on  credit,  and  the  wise  use  of  it.  As  a 
problem  of  such  consequence  and  as  a  prime 
factor  in  our  individual  success,  can  the  import- 
ance of  its  study,  and  our  thorough  mastery  of 
it,  be  over-estimated?  No;  but  that  it  has  not 
received  the  attention  it  deserves  is  a  fact  pain- 
fully regretted  by  thousands. 

Hon.  Edward  Everett,  in  an  address  delivered 
before  the  Mercantile  Library  Association  in 
Boston  in  1838,  stated  his  conviction  as  follows: 
"I  should  deem  the  formation  of  sound  and 


KNOWLEDGE  OF    "  CREDITS."  21 

sober  views  on  the  study  of  credit  one  of  the 
most  desirable  portions  of  a  young  merchant's 
education."  The  practical  merchant  is  even 
more  impressed  with  tli e  importance  of  the  sub- 
ject, as  a  result  of  his  daily  experience. 

Much  as  it  is  desired  by  the  author  that  this 
treatise  might  lead  his  readers  to  infallibility  in 
making  credits,  that  is  a  thing  beyond  his  ex- 
pectations. But  this  much  is  certain,  in  calling 
your  attention  to  the  subject,  and  a  comprehen- 
sive study  of  it,  not  alone  by  these  pages,  but 
drawing  on  your  own  resources  of  experience 
and  observation,  it  is  impossible  that  you  will 
be  other  than  largely  benefited;  and  if  nothing 
more  be  accomplished  than  to  interest  you  in 
the  study,  I  shall  be  amply  repaid.  The  benefit 
to  you,  in  that  case,  will  be  analogous  to  that 
of  a  man  face  to  face  with  a  great  danger,  of 
which  he  ha  s  been  forewarned  and  for  which  he 
is  thoroughly  prepared. 

That  the  most  rigid  adherence  to  the  rules 
here  laid  down  will  avoid  loss  in  every  instance, 
is  not  expected.  The  best  of  business-men,  the 
most  conservative  and  experienced,  i '  miss  it ' ' 
quite  often  enough.  But  there  is  a  wide  mar- 
gin between  the  maximum  of  losses  usually 
sustained  and  the  minimum  to  which  they  may 
be  reduced,  a  difference  sufficient  in  itself  to 
make  one  man  happy  and  prosperous,  and  an- 
other wretched  and  bankrupt. 

In  addition  to  the  chief  object  before  us,  which 


22  WHOM  TO  TRUST. 

is  to  become  competent  judges  of  whom  it  is  safe 
to  trust,  the  suggestions  offered  will  also  be  val- 
uable in  regulating  our  own  conduct,  so  that  we 
may  share  the  confidence  of  others,  and  be  en- 
titled to  credit  ourselves. 


LOSSES  BY  FAILUKE. 


LOSSES  BY  FAILURE. 


BUSINESS  FAILURES,  1877  TO  1886,  INCLUSIVE. 


YEAR. 

NUMBER  IK 
BUSINESS. 

NUMBER 
FAILURES. 

LIABILITIES. 

AVERAGE 
LIABILITIES. 

PROPORTION 
FAILURES. 

1877 

652,006 

8,872 

$190,669,936 

21,491 

1  in   73 

1878 

674,741 

10,478 

234,383,132 

22,369 

1        64 

1879 

702,157 

6,658 

98,149,053 

14,741 

1       105 

1880 

746,823 

4,735 

65,752,000 

13,886 

1       158 

1881 

781,689 

5,582 

81,155,932 

14,538 

1       140 

1882 

822,256 

6,738 

101,547,564 

15,062 

1       122 

1883 

863,993 

9,184 

172,874,172 

18,823 

1         94 

1884 

904,759 

10,968 

226,343,427 

20,636 

1        82 

1885 

919,990 

10,637 

124,220,321 

11,679 

1         86 

1886 

969,841 

9,834 

114,644,119 

11,703 

1        98 

8,038,255 

83,686 

1,409,739,656 

164,928 

10.22 

These  figures,  like  many  other  statistics,  con- 
vey very  little  meaning  taken  by  themselves. 
They  have  no  particular  significance,  except, 
perhaps,  that  they  look  large  to  the  casual 
reader.  Whether  in  fact,  and  in  face  of  the 
transactions  they  represent,  they  are  large  or 
small,  no  adequate  idea  is  furnished.  Only  by  a 
comparison  with  the  business  of  previous  years 
are  we  enabled  to  judge  of  tbe  present  status 
and  determine  whether  it  is  more  prosperous,  or 
otherwise,  to  those  engaged  in  it.  But  for  the 
close  student,  and  for  the  man  who  undertakes 
to  deduce  exact  facts  and  figures,  it  is  necessary 
that  he  have  some  basis  to  work  upon;  yet  sta- 
tistics furnishing  such  data  are  almost  entirely 
wanting  and  are  not  supplied  by  our  statistical 
bureau.  Nor  would  tbe  labor  required  to  ascer- 


24  WHOM  TO  TKUST. 

tain  such  figures  as  are  needed  be  warranted  by 
any  private  individual,  or  even  trade  journals. 
Nothing  short  of  a  "Bureau  of  Commercial 
Statistics,"  under  the  direct  patronage  of  the 
commercial  industries  themselves,  will  accom- 
plish anything  in  this  direction  with  the  neces- 
sary degree  of  exactitude.  Such  a  bureau,  in 
charge  of  a  competent  business -man  of  large  ex- 
perience, one  who  knows  what  kind  of  infor- 
mation to  collect  and  select,  would  be  of  incal- 
culable benefit  in  various  ways.  The  informa- 
tion and  figures  attainable  at  present  of  the 
manufacturing  and  mercantile  interests,  par- 
ticularly the  latter,  are  very  vague  and  meager, 
and  neither  assimilation  nor  approximation  is 
easy  or  possible. 

For  instance,  to  ascertain  the  percentage  of 
losses  sustained  by  our  merchants,  it  would  be 
necessary  to  know  the  total  mercantile  transac- 
tions of  the  country,  the  capital  invested  in 
mercantile  pursuits,  and  the  losses  by  failures 
of  this  class.  These  data  would  enable  us  to 
arrive  at  the  per  cent,  of  loss,  both  on  the  capi- 
tal and  the  volume  of  business. 

The  table  given  above  comprises  a  period  of 
ten  years,  and  the  condition  of  the  country  dur- 
ing that  time— from  1877  to  1886 — fluctuated 
from  extraordinary  depression  to  great  activity 
and  prosperity,  and  back  again,  thus  giving  us 
a  fair  general  average.  The  number  of  firms 
that  failed  each  year  during  the  ten  years  is  one 


LOSSES   BY  FAILURE.  25 

in  ninety;  the  failures  aggregate  the  grand  total 
of  $1,409,739,656,  equal  to  nearly  one-half  of 
the  total  (approximated)  capital  invested  in 
both  mercantile  and  manufacturing  business, 
as  shown  further  on.  The  yearly  average  of 
losses  amount  to  $140,000,000,  in  round  num- 
bers. Of  course,  the  entire  liabilities  of  the  failed 
concerns  which  these  figures  represent  were 
not  lost.  We  may  assume  that  30  per  cent, 
was  recovered;  but  this  was  temporarily  tied 
up,  and  practically  the  whole  sum  was  unavail- 
able, so  far  as  the  effect  and  injury  to  the  cred- 
itor class  was  concerned.  Deducting  from  the 
ten  years'  average  of  $140,000,000,  30  per  cent, 
as  having  been  realized,  the  net  annual  loss 
sustained  by  merchants  and  manufacturers  is 
nearly  $100,000,000. 

From  the  best  estimates  obtainable,  the  capi- 
tal invested  in  mercantile  and  manufacturing 
enterprises  in  the  United  States,  in  1880, 
amounted  to  about  four  thousand  million  dol- 
lars. One  quarter  of  this  may  be  supposed  to 
have  been  removed  from  the  danger  line  of  the 
credit  system.  As  nearly  as  possible,  we  want 
to  arrive  at  the  capital  that  is  affected  by  and 
dependent  on  this  system,  and  we  have,  approxi- 
mately, three  thousand  millions  of  capital  thus 
employed.  "  One  hundred  millions  annual  loss 
on  this  sum  is  equal  to  3^  per  cent,  on  the  total 
capital. 

To  form  an  estimate  of  the  percentage  of  loss 


26  WHOM   TO   TRUST. 

on  the  sales  or  transactions  of  the  country,  we 
may  multiply  the  capital  by  four,  as  we  turn  it 
over  probably  tliat  number  of  times,  at  least. 
That  gives  us  a  volume  of  business  equal  to 
twelve  thousand  millions  (twelve  billions),  sub- 
ject to  the  vicissitudes  of  the  credit  system.  One 
hundred  millions  losses  makes  eighty- three-one- 
hundreths  of  one  per  cent.  (.83-100)  loss  on  this 
volume  of  business. 

The  approximate  correctness  of  these  percent- 
ages is  verified  by  taking  a  certain  number  of 
business  houses  and  computing  the  average  of 
their  losses  on  a  basis  of  capital  invested.  Most 
of  them  do  not  calculate  their  losses  on  the 
basis  of  capital  employed,  but  on  that  of  the 
volume  of  business  transacted;  but  here,  also, 
we  find  the  estimate  verified  by  actual  figures, 
taken  and  averaged  from  a  large  number  of  in- 
dividual cases.  Proportionately,  the  larger 
houses  lose  less  than  the  smaller  ones;  the 
percentage  decreases  with  the  increase  in 
the  volume  of  business,  and  the  reasons  are 
obvious. 

I  desire  now  to  call  attention  to  the  question: 
Do  mercantile  pursuits  render  the  losses  usually 
sustained  imperative  and  unavoidable?  In  a 
measure,  yes ;  but  in  a  larger  measure,  no.  They 
are  chiefly  the  result  of  carelessness,  inexperi- 
ence, and  a  deficiency  of  proper  discipline  on 
the  part  of  our  business-men.  It  is  a  lack  of 
knowledge  and  judgment  in  the  matter  of  giv- 


LOSSES   BY   FAILURE.  27 

ing  credit;  or,  if  not  these,  it  is  carelessness  or 
recklessness. 

The  importance  of  this  factor  in  individual 
success  can  not  be  overestimated,  and  to  illus- 
trate it  we  have  only  to  take  the  average  busi- 
ness house  for  the  last  twenty  years,  and  figure 
up  the  losses  sustained  by  it,  and  compare  the 
sum  total,  with  compound  interest,  with  its 
present  financial  status,  and  we  shall  find  that 
it  has  lost  more  than  the  capital  accumulated 
during  the  period. 

This  may  seem  a  very  broad  assertion,  but 
figures  have  been  obtained  from  a  mifficient 
number  of  houses  to  warrant  the  conclusion. 
Nor  were  these  houses  selected  especially  for 
their  extra  good  or  bad  management;  they 
represent  what  is  wanted  ^or  our  purpose, 
namely,  a  fair  average. 

From  the  foregoing  facts  and  figures,  it  is 
apparent  that  we  are  doing  a  large  amount  of 
business,  not  alone  for  nothing,  but  at  a  loss 
of  capital,  for  the  goods  we  sell  are  part  of  our 
capital,  and,  if  lost,  that  much  capital  is  lost. 
It  may  be  asserted  that  the  merchant  adds  the 
probable  percentage  of  his  losses  to  the  selling 
price  of  his  goods,  or,  in  other  words,  figures 
his  profit  by  that  much  more.  In  that  case 
the  merchant  would  not  be  the  loser,  for  the 
solvent  buyers  would  make  good  the  loss.  But 
this  view  can  not  be  accepted  at  the  present 
day.  To  meet  competition  and  hold  and  extend 


28  WHOM   TO   TRUST. 

his  trade,  the  merchant  is  forced  to  fix  his 
profit  without  any  allowance  for  losses.  What- 
ever loss  is  sustained  by  reason  of  bad  debts, 
is  to  that  extent  a  drain  upon  his  earnings  and 
resources.  It  follows,  then,  since  competition 
enforces  nearly  uniform  profits  upon  all  in  the 
same  line  of  trade,  that  the  concern  losing  the 
least,  conies  nearest  realizing  its  calculations. 


MERCANTILE  REPORTS.  29 


MERCANTILE  REPORTS. 

The  mercantile  report  is  one  of  the  many 
innovations  of  modern  business  life,  and  is  as 
much  a  necessity  to-day  as  any  one  of  the  other 
helpful  needs  and  agents  enjoyed  by  this,  over 
past  generations.  Though  far  from  perfect — in 
fact,  quite  imperfect — it  is,  nevertheless,  an 
indispensable  adjunct  to  our  present  methods. 
It  affords  facilities  to  the  business  community 
without  which  our  extensive  relations  would 
be  materially  curtailed,  and  credits,  and  there- 
fore business  generally,  suffer  serious  restric- 
tions. That  the  mercantile  report  fills  an 
absolute  want  is  furthermore  evidenced  by  the 
very  general  patronage  of  the  mercantile  agen- 
cies by  business-men.  In  addition  to  quarterly 
and  semi-annually  revised  reference  books, 
they  also  undertake  to  furnish  their  subscribers 
detailed  reports  of  facts  and  figures  concerning 
the  financial  status  of  every  dealer  in  the 
country.  How  far  they  succeed  in  giving  reli- 
able data  is  left  for  the  patrons  of  these  insti- 
tutions to  determine.  They  certainly  succeed 
sufficiently  to  create  an  ever-increasing  demand 
for  their  labors.  The  steady  improvement 
year  after  year  of  the  agency  service  is  a  note- 
worthy and  encouraging  feature. 

In  the  nature  of  things,  infallibility  is  some- 
thing the  mercantile  agency  can  never  hope 


30  WHOM   TO   TRUST. 

to  attain,  since  stability  of  capital  actually 
employed  at  any  given  time  and  in  any  given 
business,  can  not  be  depended  upon.  Men  do 
not  always  confine  themselves  to  their  regular 
vocations,  and  capital  is  thus  often  diverted 
from  its  legitimate  operations  and  devoted 
to  speculative  purposes,  which  may  or  may 
not  be  profitable.  The  American  business 
community  is  especially  prone  to  speculation, 
and,  as  speculation  goes,  it  is  largely  at  the 
expense  of  the  regular  business.  Nor  have  we 
any  remedy  against  this,  not  even  when  the 
creditor's  capital  is  directly  used  and  jeopard- 
ized for  the  purpose.  No  restrictions  are  possi- 
ble to  regulate  the  exercise  of  individual  judg- 
ment in  regard  to  the  employment  of  money 
once  in  possession,  either  in  fee  simple  or  in 
trust.  Whether  success  or  failure  attends  a 
particular  venture,  are  matters  of  which  the 
outside  world  is  left  in  ignorance,  especially  if 
failure  should  result.  If  successful,  no  one 
finds  fault;  if  otherwise,  it  is  too  late  to 
avail. 

From  this  alone  it  will  be  seen  that  the  finan- 
cial status  of  business  concerns  would  vary 
considerably,  even  from  one  month  to  another. 
Ratings  would  require  more  frequent  revision 
than  is  possible  with  the  present  facilities  of 
the  agencies  in  order  to  cover  these  changes  of 
conditions.  It  is  usually  only  subsequent 
developments  that  bring  these  matters  to  light. 


MERCANTILE   REPORTS.  31 

and  that  at  a  time  when  the  knowledge  of  the 
facts  ceases  to  be  of  any  benefit  to  us. 

But  diversion  of  capital  from  its  legitimate 
uses,  and  to  purposes  not  at  all  speculative,  is 
also  a  matter  of  importance.  Many  business- 
men, from  miscalculation  and  poor  judgment, 
invest  too  large  a  portion  of  their  working 
capital  in  permanent  improvements  and  outside 
ventures,  not  necessarily  of  a  speculative 
nature,  and  thereby  tie  up  capital  which  should 
have  remained  a  working  force.  Although 
real  estate  and  permanent  improvements  should 
constitute  the  best  representatives  of  capital 
invested,  and  indicate  the  highest  order 
of  assets,  yet  we  know  from  experience  that 
this  class  of  property  is  not  convertible  at 
will  in  the  event  of  failure,  nor  is  it,  as  a 
rule,  available  to  the  creditors.  The  mercantile 
agency,  however,  has  no  right  to  ignore  capital 
thus  invested;  it  is  obliged  to  give  it  a  place 
among  the  assets  and  make  its  ratings  accord- 
ingly. For  this  reason  "the  keys"  used  by 
the  various  agencies  to  denote  capital  are  less 
to  be  relied  upon  than  the  report  itself,  for  the 
latter  gives  details  and  shows  what  the  capital 
consists  of  and  is  used  in,  and  from  these  we 
can  make  our  own  deductions.  The  nature  of 
the  assets  has  much  to  do  with  the  value  of  the 
ratings  for  the  purpose  of  basing  credits. 

This  much  is  certain,  if  we  could  always 
make  sure  of  getting  reliable  reports,  whatever 


32  WHOM   TO   TRUST. 

their  source  might  be,  the  credit  man's  task 
would  be  made  easier,  and  losses  by  bad  debts 
would  be  reduced  to  a  minimum.  The  weak 
feature  of  the  mercantile  agency  system  is  its 
dependence  on  correspondents,  who  are  ex- 
pected to  give  their  time  and  services  gratui- 
tously, or  nearly  so,  and  we  necessarily  have  to 
contend  with  frequent  negligence,  inaccuracy, 
and  incompetency,  and  sometimes  even  personal 
favoritism  or  -  prejudice,  as  the  case  may  be. 
That  this  has  been  and  is  being  remedied  to  a 
considerable  extent  by  the  better  class  of  agen- 
cies, we  have  evidence  from  the  improving 
quality  of  service  rendered.  Good  services 
command  good  pay,  and  it  is  due  the  business 
world  that  the  agencies  secure  competent  cor- 
respondents and  pay  and  charge  accordingly. 
We  can  afford  to  pay  well  for  reliable  reports; 
unreliable  ones  are  dear  at  any  price. 

Quite  a  prominent  feature  of  many  of  the 
collection  agencies  is  their  list  of  attorneys 
throughout  the  country,  who  are  under  con- 
tract (without  pay  however)  to  report  the  stand- 
ing of  business-men  in  their  respective  locali- 
ties. As  auxiliaries,  and  used  to  corroborate 
other  statements,  they  possess  merit,  and  are 
made  use  of  to  a  considerable  extent.  But  the 
attorneys  perform  their  labors  entirely  gratis, 
and  the  reports  from  this  source  seldom  furnish 
details,  but  simply  offer  opinions  that  parties 
are  supposed  to  be  good  or  otherwise — gener- 


MERCANTILE   REPORTS.  33 

ally  good.  The  attorneys  expect  to  establish  a 
large  clientage  through  the  acquaintance  made 
in  this  way,  and  their  compensation,  as  report- 
ers, is  expected  to  come  from  professional  serv- 
ices in  the  future. 

On  the  whole,  excepting,  of  course,  many 
inaccuracies  and  misconceptions  of  facts,  the 
mercantile  agency  report  can  be  said  to  lean 
toward  unbiased  and  truthful  statements  of 
ascertainable  facts.  Human  nature  inclines  to 
well-meaning  statements  concerning  our  fellow- 
men,  and  this  being  so,  we  may  be  tolerably 
certain  that  a  derogatory  report  has  something 
in  it  for  a  foundation,  and  the  credit-man 
should  be  slow  to  ignore  its  unfavorable  com- 
ments. 


34  WHOM  TO   TRUST. 

ANALYSIS  OP   STATEMENTS   OR 
REPORTS. 

In  the  preceding  chapter,  mercantile  agency 
reports  only  were  discussed,  but  it  was  not  in- 
tended to  be  inferred  that  business  houses  were 
dependent  on  these  for  information  exclusively. 
Information  regarding  the  standing  of  people 
in  trade  is  obtained  from  various  sources,  and 
not  infrequently  directly  from  the  applicants 
for  credit.  The  object  of  getting  a  report  is, 
of  course,  to  gain  such  information  as  will 
enable  us  to  determine  whether  a  certain  dealer 
is  entitled  to  credit  or  not,  and  if  so,  to  what 
extent.  But  what  class  of  information  do  we 
require  to  determine  this  question,  and  that 
will  enable  us  to  arrive  at  an  intelligent  con- 
clusion? 

The  farmer  who  contemplates  buying  lands 
and  settling  in  a  new  territory,  will  want  to 
know  many  things  before  he  invests  his  money 
and  locates.  His  experience  and  knowledge  of 
his  vocation  have  taught  him  that  simply  buy- 
ing so  many  acres  of  land,  regardless  of  internal 
or  external  conditions,  would  be  very  unwise; 
therefore,  before  he  invests,  he  learns  about  the 
soil,  its  condition  and  adaptation,  the  climate, 
the  markets,  the  facilities  for  transporting  his 
produce,  and  a  great  many  other  things.  A 
farmer  should  know  just  what  is  necessary  for 


ANALYSIS  OF  STATEMENTS  OR  REPORTS.      35 

him  to  investigate  in  order  to  make  a  wise  se- 
lection; and  a  practical  farmer  does  know. 
With  a  business-man,  in  making  credits,  it  is 
j)recisely  the  same.  There  are  certain  things 
concerning  a  would-be  debtor,  of  which  he 
must  inform  himself  in  order  to  judge  under- 
standingly. 

As  in  the  farmer' s  case,  our  experience  and 
business  education  have  taught  us  that  our 
safety  as  creditors  is  dependent  on  many  con- 
tingencies; on  qualities  of  mind  and  heart  of 
the  debtor;  on  his  mental,  moral,  and  financial 
status,  and  also  on  his  surrounding  relation- 
ships, etc. 

Now  we  find,  by  applying  the  rules  of  analy- 
sis to  business,  that  it  is  resolvable  into  cer- 
tain constituent  elements,  and  that  its  success, 
and  our  safety  as  creditors,  is  dependent  upon 
the  existence  and  proper  combination  of  these 
elements.  One  of  the  elements  or  requisites 
is  honesty;  another,  ability;  another,  capital, 
and  so  on;  and  when  we  have  completed  our 
analysis,  we  find  that  we  have  thirty  different 
and  distinct  elements  to  which  we  should  have 
answers,  and  on  which  it  is  important  to  get 
information.  Each  one  of  these  elements  con- 
stitutes an  important  factor,  although  some  are 
of  more  consequence  than  others.  To  take  one 
spoke  out  of  a  wheel  would  weaken  it,  though 
not  perceptibly,  perhaps.  Industry  and  capital 
in  business  may  be  likened  to  the  hub;  ability, 


36  WHOM   TO   TRUST. 

experience,  and  honesty  to  the  fellies  and  tire. 
The  spokes  come  in  to  combine  the  two  into  a 
symmetrical  and  effective  whole.  In  like  man- 
ner the  thirty  elements  or  requisites  go  to  make 
up  a  whole,  by  showing  us  the  constituent 
parts  necessary  to  insure  our  safety  as  credit- 
ors, and  success  as  business-men. 

Each  one  of  the  following  elements  is  suscepti- 
ble of  individual  analysis,  to  which  the  first 
part  of  this  book  is  devoted.  We  take  them 
without  reference  to  their  relative  importance. 
The  first  thing  we  are  usually  made  cognizant 
of  is  the  nature  of  the  business  in  which  the 
applicant  is  engaged,  the  next  thing  is  invaria- 
bly the  place  where  he  is  located.  We  there- 
fore commence  with: 

No.    1.     Nature  of  the  Business. 

No.    2.     Locality. 

No.    3.     Character  and  Habits. 

No.    4.     Ability. 

No.    5.     Experience. 

No.    6.     Application  and  Industry. 

No.    7.     Business  Education. 

No.    8.     Honesty. 

No.    9.     Economy. 

No.  10.     Married  or  Single. 

No.  11.     Age.  - 

No.  12.     Capital. 

No.  13.  Assets — Stock  and  Personal  Prop- 
erty. 


ANALYSIS  OF  STATEMENTS  OK  EEPORTS.      37 

No.  14.  Assets — Accounts  and  Bills  Receiv- 
able. 

No.  15.     Assets — Real  Estate — Exemptions. 

No.  16.     Liabilities. 

No.  17.     Volume  of  Business. 

No.  18.     Antecedents. 

No.  19.     Competition. 

No.  20.     Punctuality. 

No.  21.     Productive  or  Non-productive. 

No.  22.     Doing  Business  as  Agents. 

No.  23.     Partnerships. 

No.  24.     Doubtful  Credits. 

No.  25.  Joint  Stock  Companies  and  Coop- 
erative Associations. 

No.  26.     Women  in  Trade. 
.  No.  27.     Chattel     Mortgages      and     Other 
Liens. 

No.  28.     Insurance. 

No.  29.     Miscellaneous  Information. 

No.  30.     Old  Customers. 

It  might  seem  that  to  embody  all  these  ques- 
tions in  a  statement,  or  rather  to  exact  informa- 
tion on  them  all,  would  make  a  very  lengthy 
report,  and  be  asking  too  much  labor  from  the 
agency  or  correspondent.  But  this  is  not  so. 
An  ordinary  report,  such  as  we  all  receive  in 
our  daily  business  transactions,  is  here  submit- 
ted, which  will  be  found  to  give  satisfactory 
answers  to  every  one  of  the  series  of  questions. 
The  numbers  in  the  report  have  reference  to 
the  corresponding  numbers  in  the  foregoing 


38  WHOM   TO   TRUST. 

series  of  questions — like  numbers  representing 
questions  and  answers. 

J.  M.  S.  —  (1)  Hardware  and  stoves.  (2)  Chi* 
cago,  111.  (19)  In  business  here  since  1876. 

(11)  Age  fifty.  (10)  Man  of  family.  (21)  Tinner 
by  trade.     (9)  Saved  up   $300,  which  was  his 
capital  when  starting.     (18)  Came  from  Ohio. 
(3)  Character  and  habits  good.     (8)   Reputed 
honest  and  upright  in  his  dealings.    (4  and  7) 
Fair  education  and  business  ability.     (6)  At- 
tentive and  industrious.    (9)  Economical.     (13) 
Last  inventory,  stock  $10,000.     (14)  Accounts 
due  him,  $5,000.     (15)  Homestead,  $3,000.    (13) 
Other  personal  property,  $1,500.    Total  assets, 
$19,500.     (16)  Liabilities:    Owing  for  stock  on 
open  accounts,  $4,500.    ~No  other  indebtedness. 

(12)  Net  surplus,  $15,000.    (12)  Net  capital  in 
business,   $12,000..    (28)  Insurance  on   stock, 
$8,000.     (20)  Prompt  in  meeting  his  engage- 
ments.    (17)  Sales  last  year.  $35,000. 

ANYALSIS   AND   REMARKS. 

This  report  answers  every  one  of  our  ques- 
tions, though  some  of  them  only  inferentially. 
It  says  nothing  directly  of  his  experience,  but 
we  infer  that  he  has  had  that  for  the  last 
thirteen  years.  As  to  partnership,  he  is  perhaps 
wise  in  not  having  any,  and  the  question  does 
not  pertain  to  him;  he  is  alone,  the  report  says. 
His  antecedents,  back  of  thirteen  years  ago,  do 
not  interest  us;  his  record  while  here  is  suffi- 


ANALYSIS  OF  STATEMENTS  OK  KEPOETS.      39 

cient.  The  report  says:  "No  indebtedness 
except  on. open  account,"  so  there  are  no  chat- 
tel mortgages  or  liens.  In  regard  to  doing 
business  as  agent,  women  in  trade,  stock  com- 
panies, the  report  answers  all  these  questions 
inferentially. 

We  may  say  in  regard  to  this  man  that  he  is 
good  for  his  business  requirements  and  entitled 
to  credit  up  to  the  full  limit,  which,  being  a 
prudent  man,  as  we  see,  he  will  never  ask. 

He  has  succeeded  in  building  up  a  lucrative 
business,  and  in  accumulating  a  moderate  capi- 
tal, which  is  all  of  an  available  character.  To 
do  this  he  must  have  combined  application  with 
intelligent  management  and  economy.  His 
available  assets  are  $16,500.  He  owes  $4,500, 
but  would  be  safe  for  an  indebtedness  of 
$10, 000,  or  even  $12, 000.  His  accounts  due  him 
are  in  good  proportion  to  the  business  done, 
and  show  that  he  has  only  about  sixty  days' 
sales  outstanding,  from  which  we  infer  that  he 
looks  after  his  collections  closely.  The  accounts 
are,  therefore,  not  of  long  standing,  and  pre- 
sumably are  collectible.  His  methods  of  doing 
business  do  not  indicate  that  he  would  include 
in  his  showing,  old,  worthless  bills.  His  annual 
sales  indicate  prudence  and  conservatism. 
Many  firms  with  less  capital  would  undertake 
to  do  more  business. 

This  case  is  not  difficult  to  decide;  in  fact,  it 
is  an  exceptionally  easy  one.  The  above  indi- 


40  WHOM   TO   TKUST. 

cates  the  usual  modus  operandi  of  examining 
a  report,  and  the  line  of  reasoning  employed 
to  arrive  at  a  decision. 

For  the  purpose  of  furnishing  material  for 
analysis,  and  to  enable  those  of  my  readers  to 
whom  the  facilities  are  not  offered,  and  who 
seek,  possibly,  preparatory  knowledge  in  the 
" science  of  credits,"  I  have  selected  a  number 
of  mercantile  agency  reports  which  will  be 
found  on  pages  174  to  199.  These  are  all  actual 
reports  received  in  the  course  of  business;  only 
such  changes  being  made  as  are  necessary  to 
avoid  identification. 

The  following  thirty  chapters  will  take  up 
the  analytical  series  in  the  order  enumerated. 


NATURE  OF  THE  BUSINESS.  41 


NATURE  OF  THE  BUSINESS. 

When  we  contemplate  investing  in  business, 
the  first  point  of  consideration  with  us  is  to 
determine  the  degree  of  risk  that  pertains  to  it. 
In  a  large  sense  the  interests  of  the  creditor  and 
the  investor  are  identical.  One  risks  his  capital 
and  time;  the  other  his  merchandise,  and  the 
question  is,  therefore,  of  equal  importance  to 
both.  Now,  we  know  that  some  lines  of  busi- 
ness are  more  hazardous  than  others,  and  this 
question  of  necessity  constitutes  an  important 
factor  for  us  to  consider.  In  the  analysis  of 
our  report  we  were  called  upon  to  investigate 
a  retail  hardware  business  in  its  relation  to  reli- 
ability and-risk.  Of  this  we  know,  from  past 
and  present  observation,  that  it  is  both  safe  and 
legitimate,  and  that,  with  fair  attention  and 
ability,  it  will  always  do  well  by  its  proprietor. 
It  has  comparatively  few  drawbacks,  and  is 
exempt  from  many  of  the  ills  to  which  other 
lines  of  business  are  subject.  Losses  by  reason 
of  old  stock  or  styles,  by  damage  to  goods,  by 
age,  temperature,  or  otherwise,  are  only  the 
result  of  gross  negligence  and  inattention  in  this 
business,  and  herein  it  has  quite  an  advantage 
over  others  in  which,  from  various  causes,  more 
or  less  shrinkage  is  unavoidable.  So  far,  then,  as 
the  nature  of  the  business  under  consideration 
is  concerned,  we  call  it  exceptionally  safe  in 


42  WHOM  TO  TRUST. 

fairly  capable  hands,  and  can  dismiss  the  ques- 
tion, so  far  as  it  relates  to  this  report.  But  this 
is  only  one  of  many. 

Different  lines  of  business  are  subject  to  dif- 
ferent ills,  and  more  of  them,  which  affect  both 
the  debtor  and  creditor.  It  is,  therefore,  in- 
cumbent on  us  to  know  the  detrimental  or 
hazardous  features  in  each  case.  A  stock  of 
seasonable  goods  always  has  more  risk  attached 
than  one  of  staple  goods,  that  moves  every 
day,  and  we  find  correspondingly  more  fail- 
ures. The  most  hazardous  goods  for  the  retail 
hardware  dealer,  for  instance,  are  stoves  and 
heating  apparatus,  and  many  a  good  business- 
man has  been  bankrupted  by  an  overstock  of 
these,  brought  about  by  an  untoward  season 
or  some  other  cause  that  prevented  sale  in 
the  short  time  such  goods  are  usually  in 
demand. 

Of  staple  lines  of  business,  a  grocer's  stock 
is  probably  the  easiest  to  convert;  but  the 
grocer  makes  more  bad  accounts  than  the  hard- 
ware man,  where  the  ordinary  credit  system  is 
rulable.  In  addition  to  losses  from  this  source, 
the  city  retail  grocer  has  another  serious  draw- 
back to  success,  and  that  is  the  great  expense 
attending  his  business,  which  seems  unavoida- 
ble if  he  desires  to  retain  and  advance  his  posi- 
tion in  the  trade.  It  results  in  this,  that  the 
closest  management  becomes  necessary  to  suc- 
cess, and  the  money-making  city  retail  grocers 


NATURE   OF  THE  BUSINESS.  43 

are  few  compared  with  the  number  engaged  in 
that  business. 

But  it  is  not  necessary  to  enter  into  details  of 
every  line  of  business,  and  to  discuss  the  advan- 
tages and  disadvantages  of  each. 

Every  line  of  business  has  established  for 
itself  its  own  terms,  either  long  or  short  time, 
or  cash,  and  these  have  come  to  be  recognized 
by  the  trade  at  large,  and  are  enforced  as  if 
they  were  law.  Now,  we  find  that  the  most 
necessary  articles  to  the  community,  such  as 
flour,  meats,  sugar,  etc.,  are  sold  nearest  to  a 
cash  basis — in  fact,  they  are  sold  for  cash  only 
from  first  hands.  We  here  establish  a  starting 
point,  and  as  articles  of  commerce  become  less 
necessary  to  existence  and  comfort,  we  find  the 
terms  lengthened  out  in  proportion.  This  law 
will  be  found  to  hold  good  throughout.  From 
time  to  time,  as  profits  on  certain  lines  of  goods 
are  cut  down,  the  time  is  shortened  also,  and 
this,  too,  is  in  conformity  with  the  laws  of  com- 
merce. The  greater  the  profit,  the  greater  the 
risk  that  can  be  taken,  and  the  longer  the  time 
that  can  be,  and  is,  given. 

Seasonable  goods  are  sold  on  long  time  to 

facilitate  their  distribution,  but  they  are  made 

payable  when  the  season  for  their  use  comes, 

,  and  they  are  then  sold  for  cash  or  on  time, 

according  to  their  nature. 

The  trade  in  certain  lines  adopt  certain  terms, 
and  their  uniform  adoption  exacts  their  accept- 


44  WHOM  TO  TKUST. 

ance  by  the  community  at  large.  It  is  not 
necessary  to  state  here  the  maxim,  that  the 
shorter  the  credit  the  less  the  risk,  and  vice 
versa.  That  is  self-evident.  A  business  in 
which  the  transactions  are  for  cash,  attracts  to 
itself  moneyed  men  only,  who  are  prepared  to 
meet  its  demands  on  them,  and  there  is  little  or 
no  risk  in  the  ordinary  sense.  On  the  other 
hand,  when  time  is  given,  it  opens  the  gates  to 
speculation  on  the  future,  and  taking  chances 
on  what  should,  and  under  favorable  circum- 
stances would,  transpire.  Therefore,  the  longer 
the  time,  the  greater  will  be  the  opportunity  for 
speculative  indulgence,  and  the  greater  the  risk 
to  the  creditor. 


LOCALITY.  45 


LOCALITY. 

In  the  case  of  the  mercantile  report  cited  on 
page  38  we  have  to  do  with  a  large  city,  the 
metropolis  of  a  large  section  of  country,  with 
its  vast  and  diversified  interests.  All  the  dif- 
ferent industries  of  the  surrounding  country, 
in  a  measure  of  the  whole  country,  are  tributary 
to  it  as  a  commercial  center.  Its  own  immense 
population,  and  the  varied  enterprises  and  indus- 
tries within  its  own  limits,  create  demand  and 
supply  for  an  inconceivable  variety  and  quantity 
of  wares  and  work.  The  business  of  a  large  city, 
therefore,  is  not  dependent  upon  any  one  partic- 
ular industry,  whether  within  itself  or  tributary 
to  it.  The  prosperity  of  all  the  industries  in  and 
out  of  it,  would  mean  exceptionally  good  times 
for  the  city  dealers,  and  a  depression  in  one  or 
more  would  only  measurably  affect  it. 

With  city  dealers  and  business  houses  we 
have  always  to  consider  that  the  competition 
for  trade  is  very  great,  and  the  expense  of 
doing  business  equally  so.  It  is  always  an 
open  question,  therefore,  whether  a  new  concern' 
can  get  on  a  paying  basis  or  not.  If  it  can  se- 
cure a  share  of  the  business  from  the  start,  it  is 
well.  If  not,  a  long  struggle  for  existence  en- 
sues, which  time  alone  determines,  and  mean- 
while the  status  of  the  debtor  is  a  doubtful  one. 
A  city  merchant,  with  an  established  business, 


46  WHOM   TO  TEUST. 

has  fewer  risks  and  interruptions  to  contend 
with,  than  where  one  industry  is  depended  on 
for  the  support  of  the  community  where  he  is 
located. 

We  are  called  upon  now  to  speak  of  some  of 
the  leading  industries  that  control  the  welfare 
of  different  localities.  We  have  farming, 
mining,  lumbering,  manufacturing,  and  other 
centers.  Locality  is  an  important  factor  in 
determining  credits,  since  it  gives  us  somewhat 
of  an  idea  of  the  risk  incurred. 

In  old  farming  communities,  credit  can  be 
given  with  a  liberal  hand,  and  it  depends  mostly 
on  the  honesty  and  ability  of  the  debtor  as  to 
meeting  his  obligations.  Crops  may  be  poor 
some  years,  and  prices  low,  and  some  indul- 
gences may  be  needed,  but  otherwise  there  are 
no  contingencies  likely  to  arise  of  an  unfavora- 
ble character.  This  class  of  trade  is  not,  per- 
haps, the  most  profitable  to  the  retailer,  but  it 
is  the  safest. 

In  lumber  regions,  the  people  as  a  class  have 
plenty  of  money  in  certain  seasons  and  none 
in  others,  and  the  result  is  that  the  merchants 
there,  as  a  rule,  have  to  carry  and  be  carried. 
Their  customers  are  Jargely  composed  of  em- 
ployes who  are  paid  at  the  close  of  the  season's 
work,  and  meantime  they  have  to  be  trusted 
for  the  necessaries  and  comforts  of  life.  As 
long  as  lumbering  can  be  done  profitably  the 
merchants  are  safe,  but  "hard  times"  in  that 


LOCALITY.  47 

industry  means  dire  calamity  to  everybody 
interested,  whether  directly  or  indirectly. 

Mining  regions  offer  rich  rewards  to  dealers 
while  "the  boom  is  on,"  and  while  they  are  in 
active  operation.  High  wages  are  paid  usually, 
and  people  spend  liberally,  for  both  necessaries 
and  luxuries.  But  we  have  seen  enough  of 
mining  towns  and  localities  to  know  what  vicis- 
situdes they  are  subject  to.  What  was  a  thriv- 
ing town  three  years  ago  is  a  deserted  camp 
to-day.  New  mining  towns  can  never  be  de- 
pended on  to  "  stay  put,"  and  even  the  older 
mines  are  frequently  closed  for  one  cause  or 
another  and  the  income  of  the  population  is 
stopped  for  a  time.  All  these  interruptions 
affect  those  who  supply  goods,  both  wholesale 
and  retail.  The  shrewd  merchant  does  not 
necessarily  avoid  these  districts.  The  trade  is 
large  and  profitable  while  it  lasts.  He  secures 
a  share  of  it,  but  retires  before  the  collapse, 
for  there  are  usually  sufficient  warnings  given 
to  those  who  are  on  the  alert  for  signs. 

In  exclusively  manufacturing  centers  and  lo- 
calities, where  the  dealers  depend  almost  wholly 
on  the  employes  of  the  factories  for  patronage, 
the  conditions  are  not  such  as  to  strengthen  the 
stability  or  reliability  of  the  dealers.  They 
depend,  not  alone  on  the  employes  for  their 
trade,  but  generally  carry  them  from  one  pay- 
day to  another.  In  case  of  a  shut-down,  the 
dealer  is  not  only  liable  to  be  left  without  cus- 


48  WHOM   TO   TEUST. 

tomers,  but  he  has  also  a  number  of  bills  of 
very  doubtful  character  for  the  time  being, 
at  least  until  other  work  can  be  obtained  or 
the  mills  start  up  again.  Those  who  have 
been  in  business  during  the  last  ten  years  in 
such  localities,  especially  when  strikes  and 
lock-outs  have  occurred,  can  appreciate  the 
situation. 

There  will  always  be  traders  wherever  there 
is  a  demand  for  goods,  no  matter  what  the  con- 
ditions or  risks  may  be.  That  locality  consti- 
tutes an  important  factor,  and  that  our  security 
and  the  promptness  of  our  customers  is  better 
or  worse  accordingly,  needs  no  further  discus- 
sion. The  credit-man  should  not  fail  to  consider 
that  the  status  which  would  be  satisfactory  of 
a  dealer  in  one  place  would  not  necessarily  be 
so  in  another. 

Another  point  that  deserves  mention  here  is 
the  accessibility  of  your  customers.  You  want 
them,  preferably,  where  they  can  be  reached  by 
the  ordinary  methods  used  for  collecting.  A 
large  percentage  of  our  collections  are  made  by 
drafts  sent  to  banks.  Towns  that  have  no 
banks,  and  are  too  small  even  to  support  a  law- 
yer, place  the  creditor  at  great  disadvantage 
when  he  undertakes  to  collect. 

To  insure  collections  in  these  remote  places, 
it  is  necessary  to  send  claims  to  attorneys  often 
residing  at  a  distance,  and  this  makes  the  ex- 
pense quite  onerous.  Many  people  will  pay  a 


LOCALITY.  49 

draft  drawn  through  a  bank  when  they  would 
be  very  dilatory  in  remitting. 

Another  point  also  presents  itself,  viz.:  the 
relation  of  locality  to  distance  from  the  mar- 
kets. A  retailer  in  Chicago,  for  instance,  can 
do  a  large  business  on  a  comparatively  small 
capital.  He  is  not  required  to  carry  stock  be- 
yond his  daily  or  weekly  wants.  He  can  buy 
and  sell,  from  "  hand  to  mouth,"  and  draw  his 
supplies  from  the  jobber,  who  practically  an- 
swers the  purpose  of  a  warehouse. 

On  the  other  hand,  the  dealer  who  is  remotely 
situated  from  the  markets  is  obliged  to  carry 
stock  enough  to  last  from  one  to  six  months, 
according  to  distance  and  location.  The  city 
dealer  can  carry  a  full  assortment  in  small  quan- 
tities with  one  thousand  dollars,  we  will  say, 
while  in  the  other  case  the  same  assortment,  with 
the  increased  quantities  necessary,  will  involve 
a  very  much  larger  capital.  It  is  apparent, 
therefore,  that  to  do  a  certain  volume  of  busi- 
ness, more  capital  is  required  in  one  locality 
than  in  another. 


50  WHOM  TO  TKUST. 

LOCALITY—  CONTINUED. 

COLLECTION   LAWS. 

In  some  States  the  debtor  has  more  prptec- 
tion  than  in  others,  and  this  is  a  vital  point  to 
be  considered  in  making  credits.  The  differ- 
ence in  the  protection  granted  to  debtors  in 
different  localities,  does  not  go  so  far  as  to 
make  a  debtor  pay  when  he  has  nothing  to  pay 
with.  Devoutly  as  such  a  law  might  be  desired 
in  the  interest  of  commerce,  its  fruition  will 
continue  a  thing  to  be  hoped  for,  but  never  to 
be  realized.  But  the  point  I  wish  to  make  is 
this:  In  some  States,  notably  in  the  older  and 
more  populous  ones,  an  action  can  be  com- 
menced, judgment  obtained,  and  execution 
levied  in  ten  days,  in  amounts  under  $200,  and 
in  twenty  to  forty  days  a  judgment  is  usually 
obtainable  for  any  amount,  and  if  property  can 
be  found  it  can  be  satisfied  forthwith.  But  in 
the  Western  and  Southern  States  the  law's 
delays,  from  one  cause  and  another,  operate 
most  disastrously  to  the  creditor  class.  The 
sessions  of  the  courts  are  farther  apart,  and  it 
takes  longer  to  try  cases  and  bring  them  to  a 
focus.  After  a  decision  is  finally  reached,  the 
debtor' s  protection  comes  in  under  the  head  of 
exemptions,  stays,  etc. 

The  laws  in  the  newer  States  seem  to  operate 
with  especial  reference  to  the  protection  of  the 


LOCALITY — CONTINUED.  51 

inhabitants,  both  purposely  and  incidentally; 
nor  may  we  question  their  justness  or  expedi- 
ency. New  countries  must  offer  protection  in 
proportion  to  the  hardships  that  await  new 
comers  and  the  risks  they  have  to  take.  It  is 
simply  the  credit-man's  duty  to  know  what  the 
laws  are,  and  a  synopsis  of  these  is  easily 
obtained. 

In  the  Territories,  for  instance,  we  find  that  a 
man  of  moderate  circumstances  may  claim  as 
exempt,  nearly  all  he  possesses.  He  is  entitled  to 
personal  and  miscellaneous  property  to  the  ex- 
tent of  $1,500,  to  be  selected  by  the  debtor, 
which  may  mean  twice  the  amount  in  fact.  He  is 
entitled  to  a  homestead  not  exceeding  160  acres 
of  land,  or  one  acre  in  town,  without  limita- 
tion of  value  of  buildings  and  improvements 
thereon. 

It  will  be  seen,  then,  that  with  the  generality 
of  dealers,  in  those  localities,  the  creditor  has 
no  legal  foothold,  and  it  is  important  to  be 
cognizant  of  this  fact  when  we  extend  credit  to 
them. 

In  general,  and  when  the  buyer  is  possessed 
of  the  average  capital,  of  from  $1,000  to  $5, 000, 
we  are  not  justified  in  basing  credit  on  his 
capital.  Our  safety  lies  in  his  honor,  and  it  is 
not  prudent  to  rely  on  anything  else.  The 
applicant  for  credit  should,  therefore,  have  a 
well-established  reputation  for  upright  and 
honorable  dealings  in  those  localities. 


52  WHOM  TO   TRUST. 


CHARACTER  AND  HABITS. 

The  most  important  items  on  which  we  need 
information  are  the  character  and  habits  of  the 
applicant  for  credit,  and  if  these  are  not  good 
we  have  not  much  use  for  him  in  any  capacity, 
especially  that  of  debtor.  Ability,  experi- 
ence, and  even  capital  would  hardly  compen- 
sate for  the  lack  of  these  two  concomitant 
elements  in  the  make-up  of  a  debtor,  any 
more  than  in  the  case  of  an  agent  or  trusted 
employe. 

Character  and  habits  are  here  treated  together, 
for  the  reason  that  they  are  practically  insepara- 
ble—for our  purpose  at  least.  A  man  may 
have  exceptionally  good  habits  and  lack  good 
character  withal — in  fact,  be  a  thorough-bred 
scoundrel.  On  the  other  hand,  he  may  have 
proven  himself  a  first  class,  upright  business- 
man, of  the  highest  integrity,  worthy  of  confi- 
dence, and  yet  have  some  very  bad  habits. 
From  a  business  point  of  view,  and  where  a 
reputation  for  honesty  and  honorable  dealings 
has  been  established,  we  may  be  justified  in 
looking  lightly  on  some  personal  short-comings 
in  the  matter  of  habits.  But  this  view  of  the 
case  could  only  find  justification  where  a 
would-be  debtor  had  been  established  in  trade 
for  a  long  period.  On  general  principles,  how- 
ever, one  could  not  aiford  to  ignore  a  man's 


CHAEACTEE  AND  HABITS.  53 

habits  where  a  credit  or  a  trust  was  involved. 

Old  established  houses  have  their  record. 
The  great  difficulty  is  in  determining  the  char- 
acter of  men  just  starting  in  business.  Such 
may,  and  probably  have,  served  an  apprentice- 
ship as  clerks,  but  nothing  can  really  be  known 
of  their  character  as  principals  and  business 
managers  until  time  and  opportunity  are  given 
to  develop  them.  A  man's  habits,  on  the  other 
hand,  we  can  know,  as  they  would  be  much 
the  same  either  as  employe  or  as  principal. 

In  extending  credit,  the  character  and  habits 
of  the  party  asking  it  should  be  searchingly 
inquired  into  and  all  the  facts  ascertained. 
Our  security  as  creditors  depends  on  these 
factors  more  largely  than  on  any  other  two.  No 
applicant  for  credit  is  entitled  to  it  unless  his 
record  for  both  honesty  and  sobriety  is  above 
reproach.  The  men  of  moderate  ability,  and 
of  good  character  and  habits,  are  the  "stand- 
bys"  in  trade,  but  reversing  this  order,  we  are 
liable  to  reverse  our  fortunes  if  we  make  them 
our  debtors. 

Because  the  exceptions  prove  the  rule,  we 
can  lay  it  down  as  a  rule,  that  business-men 
who  are  addicted  to  habitual  and  excessive 
drinking,  etc.,  are  undesirable  debtors;  not 
altogether  for  the  reason  that  they  drink,  but 
because  of  the  inevitable  consequences  entailed 
through  it;  namely,  neglect  of  business,  loss 
of  time,  and  unwarranted  expense. 


54  WHOM  TO  TRUST. 

It  is  supposable  that  no  sales  are  ever  made 
without  expectations  of  payment,  and  yet  we 
find  that  men  of  all  shades  of  character,  and 
even  "  shady  characters,"  constantly  figure  in 
the  reported  failures  of  the  country.  That 
somebody  has  taken  stock  in  them  is  self-evi- 
dent. If  they  did  not  owe  anybody  they  would 
have  no  need  or  inducement  to  fail.  The  fact 
that  they  do  owe  is  prima  facie  evidence  that 
their  credit  was  good  in  some  quarter,  at  least. 
The  assumption  can  hardly  hold  good  that  the 
creditors  of  dubious  characters  in  trade  were 
cognizant  of  the  fact  of  such  dubiousness  when 
selling  to  them.  We  must,  therefore,  charge 
this  indiscriminate  and  lavish  dispensation  of 
credit,  not  to  a  knowledge  of  the  facts,  but  to 
negligence  in  obtaining  them.  And  this  is 
where  the  weakness  of  most  creditors  lies.  The 
time  to  inquire  into  character  and  habits,  and 
other  things  necessary  to  be  known,  is  when 
you  make  the  credit,  and  if  there  is  any  doubt, 
take  the  benefit  of  the  doubt  yourself. 


ABILITY.  55 


ABILITY. 

Ability  in  the  abstract  is  one  thing;  ability 
in  the  line  of  our  special  vocation  is  quite 
another.  No  matter  how  great  a  man' s  ability, 
he  can  not  hope  to  master  every  calling.  To 
select  the  vocation  suited  to  our  special  ability, 
is  the  most  important  step  in  a  man' s  career.  It 
surpasses  all  others  in  its  influence  on  our 
future  destiny.  If  phrenology  could  be  re- 
duced to  the  scientific  accuracy  which  is  claimed 
for  it,  it  would  be  a  most  valuable  aid  in  deter- 
mining our  special  aptitude  for  this  or  that 
occupation,  and  failures  would  be  the  exception 
instead  of  the  rule. 

Taking  cognizance  of  the  fact,  as  our  statisti- 
cians show,  that  only  five  per  cent,  of  our  busi- 
ness-men succeed,  we  are  forced  to  the  conclu- 
sion that  something  is  radically  wrong.  It  cer- 
tainly is  not  lack  of  business  that  is  or  can  be 
done,  but  lack  of  ability  as  merchants  that  is  the 
cause  of  so  many  failures,  and  here  is  the  root 
of  half  the  evils  incident  to  mercantile  life. 
Though  a  man  be  possessed  of  good  ability,  if 
his  efforts  are  misdirected  and  not  in  the  line  of 
his  particular  talents,  his  endeavors  will  neces- 
sarily come  short  of  his  real  capacity. 

Mercantile  life  can  be  and  is  entered  by  peo- 
ple without  any  preparatory  schooling,  and 
without  reference  to  fitness.  Any  man  with  a 


56  WHOM  TO  TEUST. 

few  dollars  and  a  desire  for  something  to  do 
can  become  a  merchant,  and  he  naturally  turns 
his  attention  to  it  as  offering  the  greatest  in- 
ducements with  the  least  requirements.  How, 
then,  can  we  expect  that  mercantile  pursuits 
should  succeed,  as  a  rule,  when  they  are  largely 
in  the  hands  of  incompetent  men?  The  law  of 
the  survival  of  the  fittest  dooms  them  to  failure. 

The  most  eminent  lawyers  and  world- re- 
nowned doctors  would  not  necessarily  make  good 
merchants  or  manufacturers,  and  vice  versa. 
It  may  be  presumed  that  the  fact  of  their  great- 
ness in  their  respective  professions  lies  in  hav- 
ing chosen  vocations  suited  to  their  particular 
ability.  The  same  may  be  said,  and  with  equal 
truth,  of  successful  merchants. 

To  undertake  to  analyze  and  define  ability, 
and  the  particular  ability  required  to  be  a  good 
merchant,  is  too  large  a  subject  to  be  handled 
here,  and  belongs  more  to  the  "  Science  of  Busi- 
ness "  than  to  the  "  Science  of  Credits."  But 
we  will  state  some  of  the  qualities  and  experi- 
ence that  observation  has  taught  us  go  to  make 
up  the  successful  merchant. 

The  sum  total  of  the  qualities  that  make  a 
successful  career  possible  may  be  defined  as 
constituting  business  ability.  Trifling  as  some 
of  these  qualities  may  seem  in  themselves,  they 
are  of  the  utmost  importance  in  forming  the 
combination. 

First,  the  merchant  must  be  a  good  judge  of 


ABILITY.  57 

human  nature  and  of  character.  At  every  turn 
this  quality  will  be  required,  and  is  especially 
important  in  the  selection  of  co-workers  and 
assistants.  Great  achievements  and  the  build- 
ing up  of  large  enterprises  are  not  possible 
without  good  assistants,  and  the  quality  of 
these  depends  on  him  who  selects  them.  Men 
have  been  known  to  succeed  in  an  eminent  de- 
gree with  hardly  any  other  qualification,  that 
was  discernable  at  least,  than  that  of  being  able 
to  surround  themselves  with  good  men,  either 
partners  or  otherwise.  This,  of  course,  is  not  a 
trait  that  can  be  cultivated  very  much.  It  is 
natural  to  some,  the  same  as  other  special  gifts, 
but  it  is  of  the  utmost  importance  to  all  busi- 
ness-men. 

The  merchant  must  be  a  good  judge  of  values. 
This  is  essential,  as  profitable  sales  depend  on 
judicious  purchases.  The  trader  is  born  with 
an  intuitive  knowledge  of  values  and  goods,  of 
the  needs  and  desires  of  the  people,  and  that 
knowledge  is  his  stock  in  trade  to  commence 
with.  He  has  also  a  quick  insight  into  the  re- 
lations between  actual  needs  and  "man's  pro- 
gressive wants,"  and  measure  of  pecuniary 
ability  to  gratify  the  same. 

The  merchant  must  have  large  executive 
ability,  and  be  an  organizer.  New  combina- 
tions are  constantly  forming  as  his  business 
expands  and  conditions  change,  and  he  must  be 
equal  to  the  emergency  of  meeting  them  and 


58  WHOM  TO   TEUST. 

adapting  himself  to  them.  Quick  discrimina- 
tion and  ready  decision  are  indispensable  fac- 
tors in  his  make-up. 

He  must  have  the  quality  within  him  to  de- 
sire to  keep  and  to  accumulate.  All  men  have 
this  desire  to  keep,  in  theory,  but  not  in  prac- 
tice. To  practice  it,  requires  self-denial,  and 
that  is  by  no  means  a  universal  trait  of  char- 
acter. 

The  merchant's  business  is  one  of  endless  de- 
tail, and  the  closest  attention  is  requisite.  It 
is  not  the  large  affairs  only  that  require  super- 
vision; unless  the  small  matters  are  looked 
after,  large  ones  will  never  present  themselves. 

Singleness  of  purpose  in  the  merchant  is  es- 
sential to  success,  coupled,  as  it  must  be,  with 
indefatigable  energy.  A  man's  energies  must 
be  bent  in  one  direction  and  to  one  pur- 
pose "for  the  achievement  of  success  in  his 
particular  line.  No  man  has  more  temptations 
offered  him  for  outside  ventures  and  money- 
making  schemes  than  the  merchant,  and  it 
requires  a  strong  make-up  to  be  proof  against 
them.  The  cause  of  innumerable  financial 
wrecks  can  be  found  here. 

To  be  a  good  financier  is  an  important  requi- 
site in  the  merchant;  but  not  in  the  sense  in 
which  that  term  is  generally  used.  The  term 
financier  is  presented  to  us  in  the  light  of  a  man 
who  goes  head-over-heels  in  debt  and  complica- 
tions, and  then  extricates  himself  as  best  he 


ABILITY.  59 

may.  The  good  merchant  avoids  complications 
that  might  imperil  control  and  thorough  mas- 
tery over  his  own  affairs;  his  obligations  are 
based  on  certainties  to  fulfill,  so  far,  at  least, 
as  human  sagacity  can  determine. 

These  are  some  of  the  elemental  traits  that  go 
to  make  up  a  good  merchant.  Others  could  be 
added,  but  for  the  purpose  of  this  chapter  fur- 
ther analysis  is  unnecessary. 


60  WHOM  TO   TKUST. 


EXPERIENCE. 

Of  ability,  experience,  education,  character, 
and  habits,  it  would  be  difficult  to  say  which  is 
the  least  important  or  most  indispensable. 
Each  would  seem  to  be  a  sine  qua  non,  though 
incomplete  in  itself.  To  engage  in  any  busi- 
ness without  experience  nowadays,  a  man 
might  be  likened  to  a  ship  without  a  rudder, 
and  the  chances  for  the  inexperienced  are  grow- 
ing less  and  less  each  year,  in  the  ratio  that 
our  standard  of  knowledge  and  experience  is 
raised.  In  the  country  we  often  find  good 
farmers  allured  to  store -keeping.  They  can 
illy  be  spared  as  farmers,  as  they  are  trained 
and  experienced  in  that  calling,  but  as  mer- 
chants they  could  well  be  spared,  and  usually 
are,  after  a  short  probation,  when  they  find 
themselves  wiser,  but  poorer,  men.  The  credit- 
man  calculates  on  about  how  long  the  ufarm 
money"  will  hold  out,  and  extends  his  accom- 
modations accordingly. 

The  aggregate  knowledge  that  has  been 
acquired  by  personal  observation  and  actual 
trials  is  called  experience.  The  kind  of  experi- 
ence we  are  looking  for  is  of  a  specific  char- 
acter and  confined  to  some  one  branch  of 
business,  and  there  is  no  department  in  trade 
to-day  that  does  not  offer  sufficient  scope  to 
monopolize  all  a  man's  time  and  attention. 


EXPERIENCE.  61 

The  more  difficult  any  business  or  profession  is 
to  learn,  the  fewer  will  be  the  competitors  to 
invade  it,  and  herein  lies  our  compensation  for 
its  mastery. 

Every  business  has  its  ups  and  downs,  its 
good  and  bad  sides.  Experience  in  a  particular 
business  enables  us  to  foresee  and  provide 
against  emergencies,  which  the  inexperienced 
mind  is  incapable  of  doing;  and,  further,  it 
enables  us,  in  a  large  degree,  to  control  circum- 
stances, instead  of  being  controlled  by  them. 
We  select  our  doctors  and  lawyers  from  the 
ranks  of  those  who  can  give  us  the  benefits  of 
a  long  practice  and  consequent  experience. 

The  experienced  man  is  always  equal  to  the 
emergencies  as  they  arise  in  his  special  depart- 
ment. He  has  been  through  all  phases  of 
u dilemmas,"  and  they  neither  dishearten  nor 
demoralize  him.  His  experience  has  furnished 
him  with  the  resources  to  combat  or  ward  off 
the  impending  danger.  He  knows  how  to  avoid 
the  shallows  and  the  rocks,  because  he  has 
learned  exactly  where  they  are.  What  would 
appear  to  others  insurmountable  barriers,  cause 
him  no  uneasiness.  He  has  learned  to  distin- 
guish the  path  that  leads  by  easy  stages. 

Men  going  into  new  lines  of  business  are  con- 
stantly at  sea,  and  the  elements  seem  always 
contending  against  their  struggling  craft.  The 
man  brought  up  to  a  particular  business,  how- 
ever, feels  as  safe  and  secure  in  it  as  if  it  were 


62  WHOM   TO   TRUST. 

a  fortress,  and  is  able  to  withstand  any  ordi- 
nary assaults  from  without  with  comparative 
compos  are.  This  much  for  experience. 

On  the  other  hand,  take  a  man  without 
experience,  and  every  mole-hill  appears  like  a 
mountain,  and  as  one  is  surmounted  another 
looms  up  before  him.  "  Hills  peep  o'er  hills, 
and  Alps  on  Alps  arise."  We  are  largely  crea- 
tures of  habit.  The  experience  acquired  by 
the  father  is,  in  a  large  part,  the  inheritance  of 
the  son.  Members  of  successive  generations 
follow  in  each  other's  footsteps  in  their  selec- 
tion of  occupations,  and  the  experience  and 
accumulated  stock  of  knowledge  of  one  genera- 
tion is  readily  appropriated  by  the  next.  The 
average  boy,  brought  up  in  his  father's  store, 
is  conversant  with  nearly  every  detail  of  the 
business,  and  seems  to  come  by  it  without  any 
particular  eifort. 

Capital  and  experience  yoked  together  make 
a  strong  combination  and  lend  to  our  business 
ventures  the  greatest  probability  of  success. 
Experience  alone  is  capable  of  acquiring  capi- 
tal, and  of  commanding  it.  Confidence  in  the 
individual  to  manage  wisely,  and  with  experi- 
ence, is  the  key  to  credit,  and  in  procuring 
credit  we  procure  capital  to  use  in  the  further- 
ance of  our  special  enterprises.  But  the  pos- 
sessor of  capital  alone,  without  experience,  is 
dependent  on  others  who  have  experience  to 
make  his  monetary  possessions  productive,  and 


EXPERIENCE.  63 

this  accounts  for  the  large  amount  of  money 
that  is  always  at  the  command  of  experienced 
men.  Experience,  therefore,  in  being  able  to 
command  capital,  is  a  most  important  factor. 
Millions  of  dollars  are  intrusted  to  the  man- 
agers of  large  corporations,  men  whose  experi- 
ence is  considered  a  sufficient  guarantee  to  the 
investors  that  their  funds  will  be  safely  and 
profitably  invested,  and  we  see  in  this  the  force 
of  our  argument.  To  experience,  therefore, 
quite  as  much  as  to  capital,  do  we  owe  the 
advancement  of  our  commercial  and  industrial 
interests.  The  surplus  accumulations  of  capi- 
tal, not  less  than  the  capital  owned  and  con- 
trolled by  inexperienced  individuals,  is  thus 
brought  into  productive  use. 

To  acquire  experience  requires  time  and 
patient  toil.  Money  can  combine  with  it  ad- 
vantageously, but  it  can  not  buy  it,  though  the 
instances  are  not  rare  where  one  is  exchanged 
for  the  other.  Money  is  very  often  exchanged 
for  experience,  though  under  protest  on  the 
part  of  the  money -owner. 

In  making  a  credit  we  need  hardly  call 
attention  to  the  importance  of  considering  the 
applicant's  experience. 


64  WHOM  TO  TRUST. 


APPLICATION  AND  INDUSTRY. 

John  Jay  said  of  a  contemporary:  "Had 
his  application  been  equal  to  his  talents,  his 
progress  might  have  been  greater." 

A  man  may  be  possessed  of  good  ability  and 
otherwise  excellent  qualities,  but  if  he  lacks 
application  and  industry,  his  chances  of  success 
will  be  very  precarious,  and  this  holds  good, 
especially  in  mercantile  life.  In  no  occupation 
are  indefatigable  energy  and  close  attention  so 
indispensable  to  success  as  in  that  of  the  mer- 
chant, and  if  he  is  not  willing,  in  this  age  of 
competition  and  push,  to  devote  himself  assid- 
uously and  energetically  to  his  calling,  he  can 
hardly  hope  to  accomplish  great  results.  The 
merchant's  life  is  not  a  path  of  roses.  It  means 
hard  work  day  in  and  day  out,  and  even 
though  the  more  laborious  part  of  the  work  can 
be  delegated  to  others,  his  active  presence 
during  business  hours  is  nevertheless  requisite. 
Irregularity  and  negligence  in  the  proprietor 
are  contagious,  and,  unlike  good  qualities, 
spread  readily  to  every  employe,  and  to  every 
department  of  his  business.  Constant  personal 
superintendence  and  vigilance  are  required  to 
keep  the  business  up  to  its  full  tension,  and  to 
infuse  into  everyone  connected  with  it  that 
spirit  of  endeavor  and  individual  effort  which 


APPLICATION  AND  INDUSTRY.  65 

is  essential  to  the  attainment  of  the  greatest 
success. 

The  man  who  would  and  who  does  succeed 
as  a  merchant  is  not  the  man  who  neglects  his 
business  to  attend  to  the  various  sports  that 
attract  people  generally.  "  Business  before 
pleasure  "  is  an  inexorable  law  to  him,  and  he 
who  undertakes  to  reverse  this  order  will  surely 
reverse  his  business  and  his  future. 

It  is  the  steady  pull  in  one  direction  and  con- 
stant watchfulness  of  your  own  particular  busi- 
ness that  is  needed  to  succeed  in  mercantile 
life,  and  to  keep  fully  posted  on  all  the  details 
of  your  business  and  its  ever- varying  status,  re- 
quires more  labor  and  attention  than  the  average 
man  comprehends,  or  if  comprehending,  is  will- 
ing to  bestow,  even  were  ultimate  success  assured 
him.  Men  work  hard  without  necessarily  com- 
bining the  quality  of  prolonged  and  steadfast 
application.  They  labor  to  get  bread  and  but- 
ter, because  they  can  not  procure  it  without. 
But  a  capacity  and  willingness  to  work,  coupled 
with  application,  signifies  vastly  more.  It 
indicates  both  physical  effort  and  will-power 
to  accomplish  a  purpose,  and  this  not  only  for 
direct  and  immediate  gain,  but  for  future  bene- 
fits. Likewise,  application  means  stick-to-it- 
iveness,  and  trusting  to  the  law  of  compensation 
for  your  reward,  which  is  always  sure  to  fol- 
low, provided  the  "  bumps"  of  application  and 
industry  are  not  overshadowed  by  those  of  an 

5 


66  WHOM   TO   TRUST. 

antagonistic  or  neutralizing  character.  Very 
industrious  people  are  sometimes  known  to 
make  little  or  no  headway  financially,  but  to 
this  we  have  simply  to  say,  that  man  was 
given  five  distinct  physical  senses,  and  if  we 
should  find  a  man  with  only  the  sense  of  touch, 
though  it  be  abnormally  developed  and  culti- 
vated, we  should  still  pronounce  him  an  imper- 
fect creation,  and  so  with  the  mental  faculties. 
In  temperaments,  we  cite  the  happy  medium  as 
our  ideal.  The  individual  to  whom  fortune 
has  decreed  a  harmonious  combination  and  co- 
ordination of  all  his  faculties,  to  him  has  been 
given  to  enjoy  the  highest  estate  of  man. 

"  Sammy,  take  care  of  your  shop,  and  your 
shop  will  take  care  of  you,"  was  the  advice  of 
a  Hebrew  father  to  his  son,  and  the  admonition 
came  from  a  competent  source.  Our  Jewish 
brethren  succeed  in  business,  or  anything  else 
they  undertake,  to  a  much  greater  degree  than 
any  other  class;  but  notice  their  methods. 
Causes  have  their  effects,  and  industry  its 
reward.  Who  works  harder  and  devotes  him- 
self more  closely  and  unwearingly  to  his  call- 
ing? He  not  only  keeps  watch  of  every  detail 
of  his  business,  but  he  is  always  on  hand  to 
give  it  personal  attention.  He  does  not  run  his 
business  by  proxy. 

Reports  usually  say  "attentive  to  business," 
or  "  not  attentive,"  with  more  or  less  details  on 
the  subject,  as  the  case  may  be.  Inattention  to 


APPLICATION  AND   INDUSTRY.  67 

one's  business  is  inexcusable,  and  is  sufficient 
cause  for  lack  of  confidence — in  fact,  no  man  is 
entitled  to  credit  who  neglects  his  own  business. 
The  business-man,  in  his  function  of  creditor, 
can  not  afford  to  ignore  so  important  a  factor 
of  strength  or  deficiency  in  his  debtor,  as 
application  and  industry. 


68  WHOM  TO  TEUST. 


BUSINESS  EDUCATION. 

In  France,  England,  and  other  countries, 
commerce  is  classed  among  the  sciences.  Al- 
though it  must  of  necessity  be  as  much  a  sci- 
ence in  this  country  as  elsewhere,  we  have  been 
content  to  let  the  science  part  take  care  of 
itself,  while  going  in  "  on  our  muscle,"  and  mak- 
ing all  the  money  we  can.  But  when  we  con- 
sider how  little  attention  is  paid  in  this  country 
to  business  training,  and  how  much  time  is 
devoted  to  other  callings  to  fit  our  youth  for 
active,  intelligent  work,  the  conviction  is  forced 
on  us  that  we  are  lax  in  our  appreciation  of 
proper  discipline. 

Commerce  rules  the  world  to-day,  and  more 
people  are  engaged  in  it  for  their  living  than 
in  all  other  callings  combined.  This  being  the 
case,  and  our  individual  and  collective  welfare 
being  dependent  on  our  efforts  as  business- 
men, why  should  we  or  how  can  we  afford  to 
remain  indifferent  to  the  really  practical  part 
of  our  education? 

To  be  sure,  our  boys  start  out  in  life  by  tak- 
ing clerkships.  These  should  be,  properly, 
apprenticeships,  and  in  some  cases  they  serve 
that  purpose;  but  with  the  large  majority  of 
cases  they  do  not.  The  eagerness  to  get  a 
dollar  a  week  more  is  the  all-absorbing  ambi- 
tion, and  to  stick  to  some  one  thing,  and  learn 


BUSINESS  EDUCATION.  69 

it  thoroughly,  is  of  secondary  importance.  As 
a  rule,  our  boys  start  out  to  get  ' £  something  to 
do,"  without  thought  on  their  part,  or  that  of 
the  parents,  as  to  the  selection  of  a  permanent 
business  to  be  followed  throughout  life. 

The  American  boy  is  always  on  the  alert  for 
more  money.  As  a  quality  in  itself,  it  is  com- 
mendable and  essential  if  he  selects  commer- 
cial life  for  his  vocation;  but  how  much  more 
effective  would  his  efforts  be,  if  his  native 
genius  were  combined  with  correct  discipline 
and  methodical  training? 

The  wise  and  well-meaning  parent  is  anxious 
to  secure  a  clerkship  for  his  son  in  some  old, 
reputable  house,  without  especial  reference  to 
pay.  He  wants  him  not  only  to  learn  some 
particular  branch  of  trade,  but  he  is  desirous 
that  correct  principles,  along  with  the  general 
routine  of  business,  should  be  instilled  into  his 
mind. 

In  youth  we  are  impressionable,  and  our 
faculties  are  equally  susceptible  to  good  or  bad 
influences.  Now  and  then  we  find  even  boys, 
who  are  a  ' l  law  unto  themselves ' '  in  their  quick 
discrimination  between  right  and  wrong,  good 
or  bad,  methods;  but,  as  a  rule,  imitation  is  the 
most  active  faculty. 

The  youths  of  the  Athenian  age  were  sub- 
jected to  the  most  rigorous  training  and  disci- 
pline to  make  of  them  soldiers  and  warriors, 
and  to  fit  them  the  better,  they  were  educated 


70  WHOM  TO   TRUST. 

as  well  in  all  the  known  branches  of  science. 
Thorough  discipline  of  mind  and  body  were 
carried  to  the  extremes  of  hardship  and  priva- 
tion. But  in  our  day,  commerce  has  super- 
seded the  art  of  war,  and  holds  sway  over  all 
the  world.  The  sword  and  the  spear  are  con- 
verted into  plowshares  and  other  implements 
to  be  used  by  an  army  of  wealth -producing  arti- 
sans, instead  of  an  army  of  bread-consuming 
idlers.  The  soldiers  and  warriors  of  the  Athen- 
ian age  have  given  place  to  the  merchants  and 
manufacturers  of  to-day,  and  why  should  not 
our  fighting  forces  be  as  well  equipped  now  as 
then? 

The  great  question  before  the  nations  of  the 
world  in  this  generation,  is  that  of  commercial 
supremacy.  Legislative  enactments  and  politi- 
cal measures  are  devised  for  the  development 
of  our  resources,  and  to  facilitate  the  exchange 
of  products,  all  with  the  view  to  our  national 
growth  and  advancement,  and  for  securing  that 
supremacy  for  our  own  country.  Considering, 
then,  how  momentous  the  question,  not  less, 
however,  than  the  capacity  and  prestige  of  our 
competitors,  if  we  would  meet  them  success- 
fully, we  must  bring  to  bear,  not  only  our  nat- 
ural advantages,  conditions,  and  aptitude,  but 
we  must  raise  these  to  their  highest  capabili- 
ties by  training  and  cultivating  our  minds  in 
that  direction. 

This  article  is  confined  to  the  merits  of  a 


BUSINESS  EDUCATION.  71 

practical  business  education,  and  is  not  intended 
to  enter  the  domain  of  education  in  general. 
Most  of  our  business-men  are  self-educated. 
Wha.t  degree  of  primary  education  should  be 
necessary  for  a  business-man  to  have,  is  outside 
the  jurisdiction  of  this  work.  We  have  to  do 
with  business  education  and  training  only,  in 
so  far  as  it  has  any  bearing  on  the  subject  of 
making  credits. 

The  applicant  for  credit  has  either  served  an 
apprenticeship  or  has  not.  If  he  has  not,  he 
is  still  to  serve,  and  in  trusting  him,  we  are 
trusting  to  the  chance  of  his  serving  it  to  a 
purpose.  If  he  has  served  his  time,  and 
acquired  a  knowledge  of  business,  it  is  desir- 
able to  know  how,  where,  and  what  were  the 
surroundings  and  influences. 


72  WHOM  TO  TRUST. 


HONESTY. 

We  have  here  to  do  with  honesty  as  we  find 
it  in  our  every-day  business  transactions  with 
one  another,  and  in  thus  confining  the  subject 
within  these  limits,  we  shall  find  that  honesty 
is  somewhat  elastic.  The  moment  we  apply 
the  moral  law  to  it,  the  subject  becomes  more 
rigid  and  inflexible;  but  to  measure  our  mer- 
cantile transactions  in  general  by  the  moral 
standard,  could  not  help  being  disastrous  to 
many  a  fair  business  reputation.  Our  business 
affairs  are  governed  by  our  civil  laws,  and  each 
man  can  draw  upon  the  moral  law  and  be  gov- 
erned by  it,  additionally,  as  much  as  he  pleases. 
The  former  exacts  only  conformity  to  the  let- 
ter; the  latter  to  the  spirit;  hence  the  man  who 
pays  his  debts  dollar  for  dollar,  and  discharges 
his  obligations  according  to  the  letter,  must  be 
called  honest.  Our  business  code  asks  for 
nothing  more,  and  how  far  he  may  fall  short  of 
the  moral  code,  we  leave  for  him  to  settle. 

Shakespeare  says:  "To  be  an  honest  man  is 
to  be  one  in  ten  thousand."  His  measure  must 
have  been  the  moral  law,  for  we  can  not  think 
that  commercial  honesty,  even  in  his  day,  was 
at  such  a  fearful  discount.  That  honesty  is 
developed  in  man  along  with  his  other  traits, 
and  in  the  same  ratio,  must  stand  an  admitted 
fact,  otherwise  our  "philosophy  of  evolution," 


HONESTY.  73 

our  ideas  of  human  progress,  would  be  wanting 
in  their  very  essence. 

Speaking  from  a  commercial  standpoint,  and 
confining  ourselves  to  those  engaged  in  mercan- 
tile pursuits,  we  find  them  honest;  i.  e.,  with  a 
liberal  allowance  for  exceptions,  as  in  other 
rules.  The  surprise  is  rather  that  people  in 
trade  or  out  of  it  are  as  honest  as  we  find  them, 
when  we  consider  the  fact  that  a  man  who  is 
half-way  sharp,  can  not  alone  be  dishonest  and 
succeed  in  defrauding  his  creditors  and  his 
friends,  but  he  can  evade  the  clutches  of  the 
law  with  equal  success.  What,  then,  tends  to 
make  men  honest?  In  the  first  place,  the 
quality  is  innate  in  man.  The  germ  of  honesty 
is  in  every  civilized  breast,  though  variously 
developed.  Secondly,  the  quality  of  honesty 
finds  compensation  in  its  own  exercise.  Hon- 
esty has  its  reward,  present  and  future, 
although  it  may  not  always  come  in  the  man- 
ner expected  or  most  desired. 

The  world's  experience,  if  not  his  own,  has 
proven  to  the  merchant  that  he  can  afford  to  be 
honest.  He  has  no  need  to  stifle  that  generous 
and  manly  impulse,  for  doing  so,  is  more  likely 
to  strew  his  path  with  thorns  than  with  roses. 
After  a  man  has  succeeded  in  gaining  a  compe- 
tency, there  is  no  longer  any  incentive  to  dis- 
honesty, and  he  values  the  good  opinion  of  his 
fellow-man  quite  as  much  as  his  possessions, 
and  no  reason  exists  for  sacrificing  either.  On 


74  WHOM  TO  TRUST. 

the  other  hand,  the  merchant  who  still  has  his 
mark  to  make,  can  by  no  force  of  reasoning 
afford  to  be  dishonest,  even  though  he  were 
dead  to  all  sense  of  honor.  If  men  could  engage 
in  enterprises  to-day,  and  to-morrow  retire  with 
sufficient  spoils  to  make  them  reasonably  inde- 
j>endent  for  life,  no  doubt  the  temptation  would 
prove  too  great  for  many  a  man  who  now 
struggles  along,  and  will  continue  the  struggle, 
as  an  honest  man.  But  even  this  case  is  not 
derogatory  to  our  faith  in  the  innate  and  prac- 
tical honesty  of  man.  The  temptation  would 
assail  those  only  whose  character  is  too  weak  or 
whose  desire  for  luxurious  living  is  too  great  to 
resist  it,  and  in  either  case  it  will  simply  prove 
that  there  was  a  lack  of  coordination  of  the 
mental  faculties.  Children  are  born  deficient 
in  their  moral  and  mental,  as  well  as  physical, 
organizations  sometimes,  and  that  we  find  occa- 
sionally a  conscienceless,  unscrupulous  member 
of  society,  must  be  accepted  in  the  light  of 
other  phenomena,  and  as  forming  the  exception, 
and  not  the  rule. 

"Honesty  is  the  best  policy,"  is  a  truism, 
the  force  of  which  we  all  appreciate  as  a  gospel 
truth,  whether  we  have  been  honest  or  not. 
The  dishonest  man  believes  it,  though  he  can 
not  speak  from  his  own  experience.  He  prob- 
ably does  so,  however,  from  observation  and  by 
comparison.  Perhaps  the  most  convincing 
proof  of  the  correctness  of  the  maxim  was 


HONESTY.  75 

given  by  an  old  merchant  on  retiring  from  busi- 
ness. He  was  giving  his  farewell  advice  to  a 
young  man  who  had  served  him  faithfully,  and 
in  whom  he  had  taken  a  deep  interest.  He 
concluded  by  saying:  u  My  son,  let  me  repeat 
to  you  that  honesty  is  the  best  policy.  I  have 
tried  both  ways,  and  I  know."  Here  was  a 
man  who  was  willing  to  acknowledge  that  he 
had  tried  both  ways,  and  by  actual  experiment 
had  found  that  the  adage  was  true. 

I  find  in  the  Bankers1  Monthly  for  October, 
in  an  address  delivered  by  Mr.  L.  J.  Gage,  of 
the  First  National  Bank,  of  Chicago,  the  fol- 
lowing axiom  laid  down:  "  All  good  men  love 
the  approval  of  the  good,  and  all  bad  men  are 
held  in  check  in  fear  of  the  good  man's  re- 
proach." The  fundamental  principles  enunci- 
ated here  bear  out  the  argument  that  man  nat- 
urally leans  toward  truth  and  honesty  and 
against  their  opposites. 

Integrity  is  the  rock  on  which  the  vast  com- 
mercial interests  of  the  world  are  resting  for 
their  foundation.  Annihilate  that,  and  we 
destroy  trade  and  commerce,  and  in  the  train 
of  its  destruction  will  follow  civilization  and  all 
the  benefits  arising  out  of  it.  Without  faith 
and  confidence  in  each  other's  honesty  there 
can  be  no  credit,  and  without  credit  very  little 
business. 

To  be  honest,  to  do  your  duty  toward  your- 
self and  your  neighbor,  is  not  a  specially  meri- 


76  WHOM  TO  TPJJST. 

torious  act.  An  obligation  or  a  duty  is  dis- 
charged with  its  conscientious  performance,  and 
that  simply  ends  it  as  it  ought  to  end.  But  the 
failure  to  perform  the  duty,  the  act  of  being 
dishonest,  for  this  there  can  be  no  excuse  on 
either  moral  or  business  grounds. 

If  your  applicant  for  credit  can  not  show  a 
clean  record  as  regards  honesty,  let  him  apply 
somewhere  else.  You  can  not  afford  to  take 
any  chances  on  him.  Even  where  we  act  most 
advisedly,  the  percentage  of  loss  is  large  enough 
without  taking  extra  hazardous  risks. 


ECONOMY.  77 


*     ECONOMY. 

With  every  advantage  of  capital,  ability, 
and  prestige,  a  merchant's  ultimate  and  perma- 
nent success  would  still  be  a  matter  of  doubt 
if  he  did  not  combine  economy  with  his  other 
good  qualities  and  advantages.  Extravagance 
is  the  cause  of  innumerable  commercial  wrecks; 
it  is  the  reef  on  which  many  a  good  craft 
founders.  Extravagance,  in  the  sense  used 
here,  has  a  wide  range.  A  man  may  spend 
$50,000  a  year  and  yet  not  be  prodigal;  whereas, 
another  would  not  be  warranted  in  spending 
$2,000,  or  even  $1,000.  This  depends  entirely 
on  a  man's  income,  and  what  portion  of  it  is 
assured  beyond  all  reasonable  doubt. 

All  fortunes,  the  largest  not  excepted,  accu- 
mulated in  mercantile  pursuits,  or,  we  might 
say,  in  any  pursuit,  are  the  result  of  strict 
economy,  and  this  applies  to  personal,  as  well  as 
business,  expenses.  You  can  not  have  the  golden 
eggs  and  eat  the  goose  that  lays  them.  The  ex- 
periment has  been,  and  always  will  be  tried,  but 
it  will  never  be  attended  with  success.  In  sum- 
ming up  the  lives  of  our  eminent  merchants 
we  shall  always  find,  underlying  and  combined 
with  other  sterling  qualities,  that  -cardinal 
quality  of  economy,  and  how  far  this  consti- 
tutes a  factor  in  their  success,  I  will  endeavor  to 
show. 


78  WHOM  TO  TRUST. 

The  poor  man,  and  even  the  moderately  suc- 
cessful, envies  the  prosperous  and  wealthy  mer- 
chant, and  fails  to  see  any  present  indications 
of  economy  in  the  latter' s  method  or  manner  of 
living.  He  fails  to  see  where  economy  cuts  any 
figure,  and,  looked  at  from  a  present  stand- 
point, the  merchant  certainly  does  not  appear 
to  deny  himself  any  pleasure  or  comfort  that 
money  can  buy  or  heart  can  wish;  but  economy, 
nevertheless,  is  the  main  factor  in  bringing 
about  the  difference  in  circumstances  between 
him  and  his  less-favored  brother.  Causes  have 
their  effects.  We  look  at  the  wealthy  mer- 
chant of  to-day  and  see  riches  and  independ- 
ence, but  these  are  only  legitimate  results  of  a 
first  cause,  and  though  the  cause  is  remote 
from  our  point  of  observation,  and  is  lost  sight 
of,  it  nevertheless  has  existence,  and  we  want  to 
make  sure  of  this  fact.  It  is  safe  to  say  that 
the  merchant,  whom  so  many  envy,  would 
never  have  become  an  object  of  envy  unless  he 
had  possessed  the  quality  of  practical  economy 
in  his  make-up  at  a  time  when  it  was  requisite, 
and  when,  to  build  a  solid  foundation,  it  was 
necessary  to  practice  self-denial  and  make^ 
every  cent  available  as  working  capital. 

The  men  who  do  the  envying  would  rarely 
have  been  willing,  under  similar  or  any  circum- 
stances, to  have  suffered  the  voluntary  priva- 
tions and  hardships  which  all  self-made  and 
successful  men  have  endured.  The  early  strug- 


ECONOMY.  79 

gles  of  all  merchants,  who  have  amassed  fort- 
unes and  built  up  colossal  enterprises,  read 
much  the  same,  and  in  many  cases  their  early 
habits  of  personal  economy  and  simplicity  are 
retained  long  after  the  need  exists  for  counting 
the  pennies. 

Man  as  a  free  agent  has  full  control  over  the 
exercise  of  this  faculty,  and  to  practice  fru- 
gality and  self-denial  is  a  voluntary  act.  To 
practice  economy  when  compulsory,  can  not 
be  designated  a  virtue.  It  is  a  virtue  only 
when  man's  will-power  is  exercised  in  the 
direction  of  voluntarily  renouncing  present 
comforts  for  the  accomplishment  of  a  future 
object;  that  is,  eventual  success  and  independ- 
ence. 

Some  writer  has  said  that  economy  is  the 
parent  of  liberty  and  ease.  The  purpose  of 
going  into  business,  primarily,  is  to  make  a  liv- 
ing and  to  provide  for  our  daily  wants,  and  the 
majority  of  people  in  trade  make  no  more.  It 
is  even  questionable  if  they  make  that,  when 
we  consider  how  much  money  is  annually  con- 
tributed through  failures,  and  this  certainly 
goes  toward  the  maintenance  of  those  who 
have  not  succeeded  in  making  a  living  in  their 
respective  callings.  Simultaneously  with  the 
merchant's  desire  to  make  a  living  comes  the 
ambition  to  make  something  more,  to  store  up 
the  fruits  of  his  labors  for  his  declining  years 
and  for  the  dependent  ones.  Eventual  liberty 


80  WHOM   TO   TRUST. 

and  ease  are  the  motives;  but  this  desire,  innate 
though  it  be  in*  our  civilized  communities,  can 
only  become  an  accomplished  fact  under  favor- 
able conditions,  and  when  the  fundamental 
requirements  of  trade  are  complied  with.  That 
they  are  not,  is  proven  by  our  trade  statistics. 

We  know,  for  a  fact,  that  consumers  will  buy 
more  when  they  can  do  so  on  credit  than  when 
they  have  to  pay  cash,  or  have  made  it  a  rule 
with  themselves  to  buy  only  for  cash.  With 
the  dealer  the  temptation  has  a  double  potency. 
For  his  personal  wants  and  indulgence,  he  has 
both  money  and  merchandise  under  his  imme- 
diate control,  though  he  may  be  indebted  for 
both,  and  not  even  a  formal  request  for  credit 
is  necessary.  He  simply  takes  what  he  wants 
and  uses  it  as  he  sees  fit.  When  his  own  and 
his  creditor's  property  is  consumed,  we  have 
the  announcement  of  a  failure.  When  we  con- 
sider, then,  the  ease  with  which  wants  can  be 
gratified,  and  compare  it  with  man' s  capacity, 
or  rather  incapacity,  to  resist  temptation,  the 
smallness  of  the  number  of  successful  business- 
men is  no  surprise.  If  the  practice  of  economy 
were  a  universal  trait,  there  would  be  less  pau- 
perism and  poverty.  It  is  the  opposite  trait  in 
man,  however,  that  prevails.  Profligacy  and 
extravagance  are  the  causes  that  disturb  indi- 
viduals and  society. 

For  practical  illustrations  of  what  economy, 
or  the  want  of  it,  will  accomplish,  it  is  only  nee- 


ECONOMY.  81 

essary  for  the  reader  to  look  back,  say  twenty- 
live  years,  and  recall  the  houses  in  business, 
and  see  how  many,  or  rather  how  few,  have 
survived  till  the  present  time.  There  must  be 
reasons  for  this,  and  a  careful  examination 
will  reveal  them.  It  will  be  found  invariably 
that  the  survivors  have  been  of  the  careful, 
conservative,  and  rigidly  economical  class. 
They  haven't  made  haste,  neither  have  they 
made  waste.  Of  a  certain  twenty-five  large 
houses  doing  business  twenty-five  years  ago,  I 
find  to-day  but  two  in  existence.  Personal 
acquaintance  with  the  business  methods  of  all 
these  houses  leads  to  but  one  verdict.  It  was 
simply  a  question  of  economy  versus  extrava- 
gance and  careless  management.  The  man  who 
is  economical  is  always  careful. 

Money  put  out  at  interest  accumulates  fast. 
Invested  in  business,  money  is  calculated  to, 
and  should,  bring  a  larger  return  than  ordinary 
interest.  Judging  from  the  past  ten  years,  a 
dollar  kept  in  business  and  allowed  to  accumu- 
late, should  double  in  about  six  years.  Now, 
as  an  illustration,  we  will  take  two  houses: 
"A"  draws  $4,000  for  his  expenses;  "B" 
$8,000.  In  ten  years  behold  the  difference  in 
their  relative  financial  conditions,  all  other 
things  being  conducted  equally  favorably. 
"A's"  savings  of  $4,000  per  year  over  "B" 
will  give  the  former,  at  the  end  of  ten  years, 
about  $80,000  excess  capital.  This  $80,000  and 


82  WHOM   TO   TRUST. 

its  compound  accumulations  of  profit,  if  retained 
in  the  business  another  ten  years,  will  consti- 
tute in  itself  an  independent  fortune.  I  make 
this  calculation  simply  to  give  a  cursory  glance 
at  what  saving  and  economy  will  do,  when  put 
to  a  practical  and  mathematical  test;  and  these 
figures  don't  lie;  they  apply  in  all  cases. 

The  great  difficulty  with  man  is,  that  his 
wants  are  more  progressive  than  his  income. 
To  make  our  business  and  our  profits  increase 
is  a  difficulty  out  of  all  proportion  to  the 
facility  with  which  we  increase  our  wants  and 
expenses.  It  takes  more  determination  and 
will-power  to  preserve  the  equilibrium  between 
these  two  factors  than  the  average  man  pos- 
sesses, and  herein  lies,  largely,  the  cause  of 
failure  among  business-men. 

To  the  merchant,  then,  about  to  extend  credit, 
the  question  of  economy  is  of  paramount 
importance,  since  the  applicant's  success  and 
our  safety  depend  largely  on  this  one  factor. 


MAKRIED    OR   SINGLE.  83 


MARRIED  OR  SINGLE. 

It  might  seem  that  whether  a  man  was  mar- 
ried or  single,  could  have  no  pertinency  to  the 
question  at  issue,  and  that  it  could  hardly  con- 
stitute a  factor  in  our  consideration  of  his  claim 
to  credit.  But  a  man' s  social  status  does  have 
a  bearing  on  the  subject,  both  present  and 
remote;  and  while  we  may  be  neglectful  of  its 
importance  in  many  cases,  it  does  not  signify 
that  we  can  really  afford  to  be  so. 

The  words  credit  and  trust  are,  in  a  sense, 
synonymous  terms.  We  necessarily  place  trust 
in  a  man  who  gets  credit  from  us.  We  trust  to 
his  honesty  or  responsibility,  or  to  legal  redress, 
to  enforce  the  fulfillment  of  his  contract;  other- 
wise, we  should  never  extend  credit  to  any  man. 
We  have  confidence  in  a  man  to  trust  him  with 
our  goods  or  money,  and  we  are  his  creditors; 
or  he  may  have  our  confidence  as  employers  for 
a  place  of  trust  as  agent  or  employe.  Either 
case  is  one  of  trust,  pure  and  simple. 

Now,  it  will  be  found  that  in  applying  to  a 
house  for  a  position  of  trust,  one  of  the  lead- 
ing questions  asked  will  be  if  you  are  mar- 
ried or  single;  and  the  question  is  not  an  im- 
pertinent one,  or  asked  out  of  mere  curiosity. 
All  things  being  equal,  the  man  with  family  will 
have  the  preference;  and  the  reason  for  it  is 
founded  on  the  presumption  that  the  latter, 


84  WHOM   TO   TUUST. 

owing  to  his  family  ties  and  domestic  respon- 
sibility, is  considered  more  in  the  light  of  a 
permanent  fixture,  more  settled,  and  is  credited 
with  a  greater  degree  of  stability.  The  single 
man,  on  the  other  hand,  without  family  ties 
and  considerations,  and  who  has  no  one' s  wel- 
fare to  consider,  and  no  reputation  and  charac- 
ter to  injure  but  his  own,  is  undoubtedly  more 
prone  to  questionable  habits  and  is  an  easier 
prey  to  temptations.  If  some  irregularity,  either 
premeditated  or  otherwise,  imperil  his  safety, 
there  is  nothing  to  hinder  him  from  getting 
out  of  the  law' s  reach  on  short  notice. 

This  is  the  way,  at  any  rate,  in  which  the 
case  is  summed  up,  though  oftentimes  quite 
unconsciously. 

The  cases  of  a  trusted  employe  or  agent  and 
that  of  a  debtor,  are  identical,  and  the  argument 
will  apply  with  equal  force  to  both. 

No  claim  is  made  here  of  greater  honesty  of 
the  one  over  the  other.  The  innate  honesty  of 
both  is  precisely  the  same,  but  difference  in 
conditions  and  surroundings  is  liable  to  cause 
different  actions  and  ambitions.  The  married 
state  with  a  man  favors  personal  economy,  con- 
centration of  effort  to  a  purpose,  the  mainspring 
of  that  purpose  being  the  comfort  and  welfare 
of  his  family.  We  furthermore  recognize  as  a 
fact,  that  if  a  man  in  business  be  a  married 
man,  he  has  a  greater  incentive  to  apply  him- 
self more  closely  to  business  and  to  devote  all 


MARRIED   OR  SINGLE.  85 

Ms  energy  and  ability  to  his  success.  Our  whole 
social  and  commercial  fabric  is  based  on  the 
individual  effort  and  desire  of  each  man  to  raise 
his  family  to  the  highest  degree  of  respect- 
ability and  independence. 


£6  WHOM   TO   TRUST. 


AGE. 

The  age  of  a  man,  if  he  is  about  to  be  your 
debtor,  is  not  an  unimportant  factor  in  deter- 
mining his  claim  to  credit.  Our  dependence  is 
not  alone  on  ability,  honesty,  and  other  ele- 
ments, but  we  rely,  from  the  nature  of  things, 
on  energy,  ambition,  and  large  combativeness. 
These  qualities  in  the  aged  or  infirm  are  on  the 
wane,  and  in  the  very  youthful  business-man 
are  often,  we  might  say  generally,  misdirected 
for  want  of  experience.  After  a  man  has 
passed  the  prime  of  life  our  confidence  decreases 
in  the  ratio  of  his  advancing  years,  and  conse- 
quent decline  of  vitality  and  active  usefulness. 
This,  of  course,  only  applies  to  cases  where  men 
past  their  prime  engage  in  new  undertakings,  or 
who  have  struggled  unsuccessfully  up  to  late 
in  life  without  gaining  a  firm  footing.  The  lat- 
ter form  quite  a  numerous  class. 

For  an  aged  man  to  engage  actively  in  busi- 
ness for  a  livelihood  is  to  us  an  admission,  un- 
consciously, perhaps,  that  thus  far  his  mercan- 
tile career  has  been  a  failure;  and  taking  the 
past  and  best  part  of  his  life  as  a  criterion, 
what  can  be  the  reasonable  expectation  for 
future  success  when  pitted  against  younger 
men,  keen  competitors,  and  newer  methods? 
And,  on  this  question  of  different  methods,  it  is 
a  fact  that,  though  the  ways  of  doing  things 


AGE.  87 

change,  men  do  not  change  with  the  changing 
methods.  Men  accustomed  to  the  ways  and 
methods  of  doing  business  fifty  years  ago 
could  not  become  reconciled  to  our  way.  There 
is  a  limit  to  man's  tenure  of  progressiveness, 
and  that  once  passed,  he  either  becomes  passive 
or  obstructive.  But,  fortunately  for  the  world, 
the  wane  of  energy  and  combativeness  resulting 
from  age  induces  passiveness,  and  permits 
younger  men  and  the  genius  of  succeeding  gen- 
erations to  build  on  the  foundations  laid  by  our 
seniors.  All  things  in  this  world  are  wisely 
arranged  to  the  end  that  man's  progressiveness 
and  development  may  not  be  retarded. 

The  argument  that  the  credit-man  would  nat- 
urally use  with  reference  to  a  would-be  debtor, 
past  the  prime  of  life,  would  be  based  on  the 
possibility  of  failure  and  the  chances  of  secur- 
ing his  account  after  that.  This  case  would 
present  little  encouragement.  The  chances  of 
recovery,  and  subsequent  ability  to  pay,  can 
hardly  be  considered.  With  a  young  or  mid  die- 
aged  man,  however,  we  feel  that  his  tenure  of 
life  is  long  enough,  so  that  a  judgment  may 
eventually  be  good ;  or  at  any  rate,  we  may  choose 
to  compromise  and  let  him  continue,  and  thus 
recover  our  loss  indirectly  through,  his  future 
patronage.  In  the  latter  case  we  feel  justified 
in  speculating  on  the  possibilities  of  the  future, 
which  we  are  denied  in  the  former. 

Extreme  youth  also  needs  consideration,  and 


88  WHOM   TO   TRUST. 

makes  our  chances  equally  precarious,  though 
for  different  reasons.  A  very  young  man,  if  he 
fails,  seldom  sticks  to  the  ship.  He  either  feels 
that  he  has  had  quite  enough  experience  in  the 
line  he  was  engaged  in,  or  knows  just  enough 
to  know  that  he  has  mistaken  his  calling,  and 
in  either  case  he  generally  seeks  employment 
for  which  he  thinks  he  is  better  adapted.  Gen- 
erally, he  is  lost  sight  of  by  his  old  creditors  and 
those  interested  in  his  'first  business  venture, 
and  by  the  time  he  gets  ready  to  embark  in 
business  again,  old  claims  against  him  are  for- 
gotten or  outlawed. 

The  experience  of  all  business-men  is  corrob- 
orative of  these  statements  concerning  the  ex- 
tremes of  youth  and  age,  and  the  credit-man 
should  take  full  cognizance  of  them. 


CAPITAL.  89 


CAPITAL. 

We  have  thus  far  dwelt  on  the  importance  of 
things  which  in  themselves  would  not  pay 
bills.  We  can  not  take  five  dollars'  worth  of 
experience  or  of  ability  and  use  it  as  collateral, 
or  as  an  equivalent  to  money  value.  We  can, 
however,  use  our  experience  and  ability  in  such 
manner  as  will  produce  the  five  dollars,  and 
with  the  proceeds  pay  the  debt. 

The  man  who  loans  you  his  property — that  is 
to  say,  trusts  you  with  his  goods — does  so  with 
the  belief  that  their  value  will  be  augmented 
by  the  aid  of  your  experience,  ability,  and 
labor.  Absolute  confidence  in  your  integrity 
are  the  conditions  of  such  a  credit,  but,  in  the 
generality  of  cases,  the  creditor  would  also  re- 
quire, for  his  safety,  a  proportion  of  capital,  to 
be  furnished  by  you,  and  the  larger  that  pro- 
portion of  capital  is  to  the  credit  asked,  the 
better  it  is  for  both  debtor  and  creditor. 

If  all  men  paid  spot-cash  for  all  they  bought, 
there  would  be  no  need  of  questioning  their 
ability,  honesty,  or  anything  else.  Trade  dis- 
tinguishes between  neither  race,  color,  nor 
religion. 

The  amount  of  capital  required  in  any  given 
case  to  insure  safety  and  success,  is  an  uncer- 
tain quantity,  ranging  from  0  to  100.  Some 
men  have  the  faculty  of  making  money,  or  rather 


90  WHOM  TO   TRUST. 

of  accumulating  it,  under  the  most  unfavorable 
circumstances,  while  others,  even  more  favora- 
bly, situated,  can  never  make  both  ends  meet. 

In  the  customer,  therefore,  asking  credit,  we 
have  to  consider  all  the  elements  that  go  to 
make  up  a  good  business-man,  and  let  the  cap- 
ital be  the  last  consideration  instead  of  the  first; 
though  it  would  seem  that  so  important  a  factor 
as  capital,  should  be  the  primary  consideration. 
As  we  find  business  conducted,  it  must  stand  as 
an  admitted  fact,  that  few  houses — wholesale, 
retail,  or  manufacturing — restrict  their  business 
to  a  basis  of  their  cash  capital.  We  may  safely 
calculate  that  nine  out  of  ten  could  not  do  suf- 
ficient business  to  make  it  profitable  were  they 
limited  to  this  in  their  transactions.  What 
they  use  in  lieu  of  capital,  is  confidence,  and 
as  long  as  they  succeed  in  holding  this,  they 
can  continue  and  prosper.  The  point  desired 
to  be  made,  is,  that  the  capital  ordinarily  con- 
trolled by  a  dealer  is  not  sufficient  without  he 
also  has  the  confidence  of  the  community. 
Therefore,  when  he  suffers  this  to  be  lost  by  any 
unfortunate  or  questionable  maneuver,  his  re- 
sources are  crippled,  and  his  chances  must  there- 
after be  ranked  doubtful.  Capital  and  confi- 
dence are  deserving  of  the  motto:  "  United  we 
stand,  divided  we  fail." 

Of  capital  itself,  one  of  the  most  important 
things  to  know,  is  how  its  owner  came  into  pos- 
session of  it. 


CAPITAL.  91 

(1)  If,   as    a    clerk,    he    lias    been    gaining 
experience  and  education,  and  by  dint  of  econ- 
omy and  frugal  habits  lias  accumulated  a  capi- 
tal with  which  he  proposes  to  do  business  on 
his  own  account,  every  dollar  of  that  man's 
capital  has  an  enhanced  value.     In  the  first 
place,  he  has  shown  ability  to  earn,  and  frugal- 
ity to  save,  and  having  both  earned  and  saved, 
he  knows  the  value  of  money  as  no  man  can 
who   has    done  neither.     This   man    may    be 
regarded  as  good  for  any  reasonable  business 
wants,  and  is  entitled  to  our  confidence. 

(2)  If  the  money  was  inherited  by  a  young 
man,  or  he  in  any  way  came  into  possession  of  it 
without  effort  on  his  own  part,  and  he  uses  it  to 
engage  in  business,  it  will  then  depend  entirely 
on  how  much  natural  ability  and  experience  he 
combines  with  his  capital.     Without  an  estab- 
lished reputation  as  to  his  business  qualifica- 
tions, his  capital  would  be  all  there  is  to  base 
credit  on;  hence,  we  could  only  trust  him  with 
safety   to   the    extent   of  his  bank  account. 
Acquiring  the  needful  experience  and  education 
should  always  precede  the  employment  of  cap- 
ital, but  where  the  education  and  experience 
are  undertaken  to  be  gained  concurrently  with 
the  use  of  capital,  there  is  always  danger  that 
the  latter  will  be  lost  before  the  former  is 
gained. 

(3)  Cases    that    frequently    come    up   are, 
where  a  young  man  without  experience,  and 


92  WHOM  TO  TRUST. 

with,  next  to  no  ability,  usually,  is  started  by 
some  well-to-do  relative,  father,  mother,  uncle, 
or  aunt.  There  is  said  to  be  no  end  of  money 
behind  the  young  man,  but,  as  experience 
proves,  the  end  of  the  money  is  seldom  very  long 
in  being  reached.  This  class  is  not  very  difficult 
to  handle  for  the  credit -man.  It  is  generally 
only  a  question  of  time  when  the  aforesaid  rela- 
tives become  solicitous  about  the  business  and 
its  success,  and  they  must  be  secured,  and  it  is 
usually  understood  in  the  beginning  that  they 
shall  not  lose  by  the  venture,  no  matter  who 
else  loses.  Of  course,  the  general  creditor 
ugets  left."  Experience  teaches  that  credit 
must  here  be  confined  within  very  narrow 
limits. 

(4)  To  engage  in  mercantile  pursuits,  men  do 
not  have  to  go  through  a  preparatory  routine  of 
study  or  of  apprenticeship,  like  the  professional 
man  or  the  man  with  a  trade.  A  man  can  not 
be  a  doctor  to-day  and  a  lawyer  to-morrow,  or 
a  shoemaker  one  day  and  a  tailor  the  next;  but 
either  of  them  can  turn  merchant  at  any  time. 
Men  leave  professions,  trades,  farms,  etc. ,  every 
day  and  enter  into  business  regardless  of  pre- 
vious training,  or  go  from  one  kind  of  business 
to  another,  as  if  to  be  a  merchant  was  an  in- 
born attribute  of  every  man. 

To  formulate  a  rule  by  which  to  pass  judg- 
ment on  this  heterogeneous  tribe,  or  rather  this 
"  job  lot,"  would  be  impossible.  Applications 


CAPITAL.  93 

for  credit  in  these  cases  should  be  governed  by 
the  record  of  previous  business  connections  and 
conduct,  and  that  these  are  obtained  is  most 
essential.  This  will  furnish  valuable  data  for 
the  credit-man,  and  may  or  may  not,  in  his 
opinion,  entitle  the  applicant  to  credit.  But  in 
the  absence  of  any  such  data,  the  applicant's 
claim  to  credit  can  only  be  considered  on  the 
basis  of  his  cash  capital,  and  the  future  must 
establish  his  claim  to  increased  confidence. 

The  further  consideration  of  capital  will  be 
taken  up  again  under  the  head  of  "Limit  of 
Credit." 


94  WHOM   TO   TRUST. 


ASSETS:     STOCK    AND    PERSONAL 
PROPERTY. 

We  have  reference  here,  of  course,  to  that 
portion  of  the  assets  of  an  insolvent  concern, 
which  consists  of  merchantable  wares  or  goods. 
The  term  merchandise  is  understood  to  mean 
articles  of  commerce  in  general  demand,  or 
wares  that  have  ready  sale.  When  we  have  to 
do,  therefore,  with  merchandise  assets,  to  be 
closed  out  and  converted  into  cash,  we  may 
generally  and  reasonably  expect  to  realize  some- 
where near  the  original  cost  price,  provided 
that  the  goods  were  bought  judiciously,  and 
provided  a  market  exists  where  disposition  of 
them  must  be  made.  Ordinarily  this  class  of 
assets  is  the  most  available  to  the  creditor,  and 
brings  more  nearly  face  value  than  any  other, 
though  even  here  the  shrinkage  is  always  con- 
siderable, not,  however,  from  lack  of  represent- 
ative market  value,  but  for  reasons  outside. 

An  assignee's  sale,  according  to  the  manner 
in  which  such  sales  are  usually  made  and 
allowed  to  drag,  always  involves  large  expense 
for  clerk  hire,  rent,  and  incidental  items, 
besides  legal  services,  etc.  If  closed  out  by 
piece-meal  the  expenses  will  be  out  of  all  pro- 
portion to  the  receipts,  and  the  net  proceeds 
will  be  equally  impaired.  If  sold  in  a  lump  for 


ASSETS:  STOCK  AND  PERSONAL  PROPERTY.  95 

cash,  the  buyer  usually  names  his  own  terms, 
and  in  both  instances  the  creditor  fares  about 
alike,  only  that  the  latter  method  is  the  best, 
because  it  is  the  quickest,  by  avoiding  contin- 
gencies in  allowing  returns  to  be  made  to  those 
interested. 

From  this  it  will  be  seen  that  in  case  of 
liquidation  by  assignee's  sale,  even  the  most 
available  portion  of  a  bankrupt's  assets  will 
undergo  considerable  shrinkage  before  it  is 
converted  into  cash  and  ready  to  divide,  and 
that  35  per  cent,  loss  on  the  appraised  market 
value  (leaving  the  creditors  65  per  cent. )  is  only 
a  fair  average  discount. 

In  calculating,  then,  the  value  of  a  dealer's 
stock  in  trade  as  part  representative  of  his  capi- 
tal, we  are  not  warranted  in  estimating  it  at  over 
65  per  cent,  on  the  purported  inventory  value, 
when  a  credit  is  in  contemplation.  In  few 
cases  will  this  figure  be  exceeded,  and  in  many 
cases  it  will  not  be  reached.  In  making  cred- 
its, the  possibility  of  a  failure  should  always  be 
borne  in  mind,  and  our  estimates  of  property, 
to  be  safe,  must  be  based  on  that  contingency. 

In  respect  to  manufacturing  business,  we 
must  allow  ourselves  even  greater  latitude  for 
shrinkage  of  assets.  A  large  portion  of  the 
assets  will  necessarily  be  represented  by  stock 
in  various  stages  of  completion  at  all  times,  and 
which,  consequently  have  no  market  value.  In 
the  event  of  failure,  this  class  of  assets  could 


96  WHOM   TO   TRUST. 

only  be  converted  at  great  sacrifice  of  material 
and  labor  expended  thereon,  and  they  possess 
really  less  commercial  value  than  the  raw 
material  out  of  which  they  are  made.  We  can 
give  them  only  a  nominal  value. 

Next  comes  the  stock  of  manufactured  goods. 
The  ready  conversion  of  these  into  cash  will 
depend  on  the  nature  of  the  goods.  What  they 
may  bring  in  the  open  market  and  at  forced 
sale,  is  governed  by  circumstances.  If  the  prod- 
uct happens  to  be  of  a  seasonable  kind,  then 
it  must  be  sold  in  its  season  to  realize  the  most, 
and  if  sale  is  forced  out  of  season,  the  sacrifice 
will  be  proportionately  large.  The  raw  ma- 
terial, on  the  other  hand,  represents  and  com- 
mands more  nearly  market  value,  and  can  in 
nearly  all  cases  be  readily  disposed  of,  even 
more  so  than  the  manufactured  product  itself. 

But  the  assets  of  a  manufacturing  concern 
that  represent  the  least  value  at  forced  sale  are 
those  consisting  of  the  plant,  so-called;  i.  e.,  the 
machinery,  tools,  fixtures,  patterns,  etc.  This 
class  of  property,  if  sold  at  any  time,  will  bring 
only  second-hand  prices,  and  if  closed  out  by 
an  assignee,  only  a  small  percentage  of  the 
original  cost  is  realized.  The  creditors  have 
little  to  hope  for  from  this  source  in  the  way  of 
addition  to  their  dividend.  What  represents 
thousands  of  dollars,  will  scarcely  realize  as 
many  hundreds.  For  this  reason  manufactur- 
ing concerns  generally  effect  a  settlement  on 


ASSETS:  STOCK  AND  PERSONAL  PROPERTY.  97 

their  own  terms.  The  creditors  do  not  want  to 
carry  on  the  business;  it  can  not  be  sold  at 
anything  near  its  actual  value,  and  so  the 
owners  are  the  most  desirable  parties  to  keep 
and  continue  to  operate  it  on  whatever  reason- 
able terms  they  choose  to  name.  They  can,  in 
fact,  afford  to  pay  more  for  it  than  outside 
parties. 

The  assets  of  a  merchant's  stock  in  trade 
being  worth  about  65  per  cent.,  that  of  a  manu- 
facturer can  not  be  estimated  at  more  than  35 
per  cent.,  if  closed  out  for  the  benefit  of  the 
creditors;  and  in  making  credits  we  must  dis- 
criminate, therefore,  between  the  different 
branches  of  business,  and  duly  consider  the 
nature  of  the  assets. 


98  WHOM  TO  TRUST. 


ASSETS:    ACCOUNTS  AND 'BILLS 
RECEIVABLE. 

It  is  anything  but  amusing  to  a  creditor  to 
read  an  assignee's  report  of  the  condition  of  a 
defunct  concern,  when  that  official  states  with 
cold-blooded  disinterestedness,  that  of  the 
$5,000  due  the  insolvent  in  accounts  and  notes, 
only  about  $1,000  is  collectible.  What  a  picnic 
the  dead-beats  in  the  bankrupt' s  locality  must 
have  had,  and  what  a  generous,  accommodat- 
ing merchant  he  must  have  been!  Generous 
man,  surely — to  all  but  himself  and  those  who 
undertook  to  help  him.  And  such  instances 
are.  not  rare,  by  any  means.  Far  worse  come 
under  our  notice  repeatedly,  and  we  resign  our- 
selves with  stolid  indifference  as  to  the  out- 
come. 

Ordinarily,  however,  this  class  of  assets  will 
bring  as  much  as  merchandise,  viz.,  about  65 
per  cent.  net.  Accounts  and  notes  do  not  cost 
as  much  to  collect,  as  goods  do  to  convert  into 
cash.  There  is  neither  rent,  clerk-hire,  nor  any 
of  the  other  expenses  incident  to  carrying  and 
disposing  of  a  stock  of  goods  and  personal 
property,  and  if  the  insolvent  has  used  moder- 
ately good  judgment,  the  shrinkage  on  their 
face  value  may  be  calculated  not  to  exceed  35 
per  cent.  In  the  hands  of  the  owner  they 
would  be  worth  considerably  more,  for  the 


ASSETS:  ACCOUNTS  AND  BILLS  RECEIVABLE.  99 

reason  that  debtors  of  a  bankrupt  concern  are 
never  eager  to  pay,  and  in  fact,  will  use  every 
means  to  evade  even  just  debts.  The  assignee's 
or  receiver's  task  is,  therefore,  made  difficult 
and  expensive,  and  a  large  portion  of  the 
accounts  is  usually  absorbed  in  legal  fees  and 
costs. 

It  is  safe  to  assume  that  men  always  engage 
in  business  where  their  capital  can  find  employ- 
ment to  its  full  extent.  A  man  with  $1,000 
capital  generally  undertakes  to  do  a  business 
where  twice  that  sum  would  be  needed,  for 
comfort  and  ease.  He  calculates  on  the  time 
he  has  to  give;  that  is,  bases  his  calculations 
on  the  terms  nominally  established  in  his  trade. 
If  the  calculation  is  made  to  hold  good,  and  he 
is  firmly  resolved  to  do  his  credit  business 
without  swerving  from  his  purpose,  he  is  all 
right.  But  very  few  have  the  nerve  to  do  this, 
and  fewer  still  appreciate  the  importance  of 
limiting  their  credit-giving. 

The  ignorance  on  this  question  is  often  seen  in 
merchants,  who  seem  to  think  that  if  they  pay 
interest  on  past-due  accounts,  that  they  are 
fulfilling  all  the  obligations  as  between  debtor 
and  creditor.  No  merchant  can  afford  to  loan 
any  portion  of  his  working  capital  for  simple 
interest.  In  order  to  make  it  pay,  he  must  turn 
his  capital  many  times  in  a  year.  To  loan 
it  out  at  6  per  cent,  means  simply  getting 
6  per  cent,  per  annum.  Let  any  merchant 


100  WHOM   TO   TRUST. 

undertake  to  pay  all  the  expenses  of  doing 
business  for  a  return  of  only  6  per  cent,  on 
his  capital  once  a  year,  and  he  will  very  soon 
have  no  capital.  And  what  holds  good  when 
taken  on  a  large  scale,  holds  equally  good  on  a 
smaller. 

As  to  the  importance  of  strict  adherence  to 
your  terms,  and  insisting  that  they  shall  be 
lived  up  to  on  the  part  of  your  customers,  the 
following  simple  illustration  will  suffice:  If  a 
merchant  has  a  capital  which  enables  him  to 
give  sixty  days'  time  and  still  discount  his 
bills,  does  it  cut  any  figure  or  interfere  with 
his  discounting  his  bills,  should  he  be  com- 
pelled to  give  ninety  days?  Most  certainly 
it  would.  He  would  have  tied  up  additional 
capital,  equal  to  thirty  days'  sales,  which 
would  not  be  available  to  him  in  time  to  dis- 
count his  own  bills  any  longer.  The  longer  the 
time  that  is  given  or  allowed  to  be  taken,  the 
greater  will  be  the  proportion  of  our  capital 
made  unavailable.  Large  and  first-class  houses 
understand  this,  and  we  have  always  found 
them  demanding  punctuality  in  the  observance 
of  terms.  A  firm  doing  a  business  of  $1,000,000 
per  month,  for  instance,  if  it  gives  sixty  days' 
time,  means  that  $2,000,000  are  owing  it,  and 
ninety  days'  would  mean  $3,000,000  outstand- 
ing. Of  course,  more  or  less  of  our  sales  are 
discounted,  but  this  we  anticipate  in  our  cal- 
culations here  as  well  as  in  practice. 


ASSETS:  ACCOUNTS  AND  BILLS  RECEIVABLE.  101 

Whether  we  undertake  to  discount  our  bills 
for  cash  or  buy  on  time,  it  will  be  seen  that  our 
safety,  comfort,  and  reputation  for  promptness, 
depend  very  much  on  the  relative  proportions 
of  accounts  and  bills  receivable  to  our  capital. 
A  man  with  $10  doing  a  C.  0.  D.  business,  can 
turn  his  capital  every  day  in  the  year  if  buyers 
can  be  found.  Making  10  per  cent,  profit  on 
each  turn,  that  $10  would  earn  over  $300  per 
year,  supposing  that  the  daily  profit  was  put 
aside.  That  same  man,  if  he  sold  his  $10 
worth  of  goods  on  six  months'  time,  could  only 
turn  his  capital  twice  a  year,  and  he  would 
make  only  twice  10  per  cent,  on  $10. 

This  treatise  will  not  permit  of  additional 
argument  on  this  subject,  but  we  can  not  allow 
the  opportunity  to  pass  without  calling  special 
attention  to  its  importance  as  a  prominent 
factor  in  the  science  of  credits. 

Giving  indefinite  time  and  carrying  your  cus- 
tomers as  long  as  they  desire,  at  interest,  is 
being  done  successfully  and  profitably  by 
merchants  sometimes,  and  they  are  shrewd 
merchants.  But  they  are  men  who  have  suffi- 
cient capital  to  carry  on  both  mercantile  and 
banking  business,  and  can  conduct  the  one  con- 
jointly with,  but  independently  of,  the  other. 
The  merchant  turns  banker  every  three  or  six 
months,  and  gets  his  accounts  secured  and* 
drawing  good  interest.  He  could  use  his  bank- 
ing or  surplus  capital  in  no  more  profitable  or 


102  WHOM  TO  TRUST. 

safer  way.  He  furthermore  ties  these  men  to 
Mm,  and  as  long  as  they  owe  him  and  he 
wants  their  patronage,  he  need  not  fear  com- 
petition. 

But  this  class  of  merchants  are  the  exception. 
The  great  mass  we  have  do  with  lack  the  capital, 
and  some  also  the  brains,  to  do  one  business 
comfortably  and  as  it  should  be  done. 


REAL  ESTATE— EXEMPTIONS.  103 


REAL  ESTATE— EXEMPTIONS. 

Real  estate  and  permanent  improvements 
should  offer  the  very  best  basis  for  credit,  and 
they  do,  when  clear  and  unincumbered.  But 
very  few  merchants,  comparatively,  hold  prop- 
erty in  fee  simple.  There  is  nearly  always  an 
incumbrance  on  it,  large  or  small,  but  always 
large  enough  to  make  the  property  unavailable 
for  the  general  creditor  in  case  of  insolvency. 
Even  when  the  property  is  scheduled  as  clear 
at  a  given  time,  the  owner  usually  raises  money 
on  it  before  an  assignment  is  made,  sometimes 
with  the  expectation  of  tiding  over,  and  some- 
times to  save  it  from  the  wreck;  but  as  cred- 
itors are  not  inclined  to  advance  more  money 
in  order  to  control  the  debtor's  equity,  the 
result  is  that  whatever  sum  that  equity  may 
represent,  it  is  seldom  convertible  or  available 
as  an  asset  for  the  benefit  of  the  creditors. 

There  is  this  good  feature  with  real  estate, 
however,  as  part  of  the  representative  capital: 
It  can  not  be  transferred  without  giving  imme- 
diate notice  to  the  public.  The  records,  as  are 
those  of  the  chattel  mortgage,  are  closely 
watched  by  the  mercantile  agency  reporters  for 
the  benefit  of  creditors,  and  whether  conveyed 
for  legitimate  or  fraudulent  purposes,  the 
community  is,  in  either  case,  advised  of  the 
fact. 


104  WHOM   TO   TEUST. 

A  homestead  is  exempt.  The  Homestead  law 
in  various  States  places  different  limits  on  the 
value  that  may  be  claimed  as  exempt,  but  there 
is  a  wide  latitude  allowed  usually  in  the 
appraisal,  and  practically  the  creditor' s  equity 
in  it  is  never  tangible.  The  value,  whatever  it 
may  be,  can  not,  therefore,  be  considered  as 
part  of  the  working  and  available  capital  of  the 
business.  It  adds  to  a  man's  credit  in  this, 
that  it  makes  him  more  of  a  fixture,  and  enables 
him  to  live  more  economically  to  the  extent 
that  he  saves  paying  rent. 

In  new  States  and  Territories  the  laws  are 
particularly  favorable  to  the  people  in  them, 
and  the  exemptions  warrantable  under  the 
statutes  give  the  debtor  class  all  the  advantage. 
For  the  creditor  there  exists  no  legal  jurisdic- 
tion, and  practically  he  is  more  dependent  on 
the  honor  and  honesty  of  his  customers  than 
he  is  on  the  exercise  of  any  legal  rights  that  he 
ought  justly  be  allowed  to  claim;  but  notwith- 
standing this  fact,  and  in  spite  of  the  insecurity, 
so  far  as  a  property  basis  is  concerned,  credit 
to  those  localities  does  not  seem  to  suffer 
material  restriction. 

The  credit-man  is  sometimes  misled  by  the 
scheduling,  on  the  part  of  his  customer,  of 
store-building  as  part  of  his  capital,  when  in 
fact  it  is  used  conjointly  for  business  and 
dwelling  purposes,  which  brings  it  under  the 
head  of  exemptions  and  the  Homestead  law. 


KEAL  ESTATE — EXEMPTIONS.  105 

These  points  are  important,  and  a  thorough 
knowledge  of  the  nature  of  the  property,  either 
real  or  personal,  is  indispensable  in  order  to 
reasonably  insure  our  safety  as  creditors. 

The  business  code  of  fifty  years  ago  required 
of  a  debtor,  who  made  any  pretense  to  honesty 
and  honorable  conduct,  that  he  turn  over  every 
dollar's  worth  of  property,  without  reference 
to  legal  exemptions  whatever,  in  liquidation 
of  his  debts.  A  man  was  considered  dishonest 
who  kept  back  anything  whatsoever;  but  this 
code  has  given  place  to  a  more  modern  and 
extenuating  one.  The  unfortunate' s  family  is 
considered  to  be  entitled  to  a  home,  if  one  is 
owned,  and  the  commercial  ethics  of  the  pres- 
ent day  sanction  its  exemption  as  a  debt-paying 
factor.  The  family,  in  particular,  is  a  gainer 
by  the  operation  of  these  ethics,  and  society  at 
large  is  relieved  of  a  possible  burden.  From 
the  standpoint  of  commercial  ethics  of  the 
present  time,  the  bankrupt  is  accorded  not  only 
a  legal,  but  a  moral,  right  to  provide  a  home 
for  his  wife  and  children  and  keep  them  in  the 
enjoyment  of  it,  and  the  sentiment,  while  it 
may  be  abused  frequently,  is  both  charitable 
and  humane,  and  in  harmony  and  accord  with 
our  sense  of  national  and  individual  independ- 
ence. 


106  WHOM   TO   TKUST. 


LIABILITIES. 

ACCOUNTS   AND    BILLS    PAYABLE    IN    PKOPOK- 
TION  TO   CAPITAL. 

Things  must  always  bear  relative  propor- 
tions to  each  other  to  insure  safety  of  the 
whole.  This  holds  as  good  in  carrying  on  and 
building  up  a  business,  as  in  the  construction 
of  a  house.  In  the  chapter  on  the  "  Limit  of 
Credit,"  on  page  171,  we  have  discussed  the 
question  of  how  much  a  business  can  safely 
owe  in  proportion  to  its  assets,  from  the  stand- 
point of  the  creditor.  To  suppose  a  case  of  a 
merchant  whose  liabilities  are  equal  to  his 
assets,  is  practically  admitting  a  clear  case  of 
insolvency  into  our  argument,  and  a  case  with- 
out capital.  This  is  a  hopeless  case,  but  such 
cases  are  not  nearly  as  rare  as  they  might  be, 
and  sometimes  they  even  enjoy  good  credit  and 
unbounded  confidence.  But  there  is  always  an 
end.  The  staving-off  process  works  for  a 
while,  and  accommodating  creditors  remain 
patient  beyond  the  limits  of  prudence.  At 
last,  when  endurance  has  ceased  to  be  a  virtue, 
and  the  debt  must  be  paid,  and  neither  exten- 
sion of  time  nor  further  credit  for  goods  can  be 
obtained,  the  culminating  point  is  reached,  and 
we  are  glad  to  take,  in  a  case  of  this  kind,  50 
cents  on  the  dollar,  and  call  ourselves  lucky  at 
that.  In  fact,  50  cents  is  quite  a  princely  offer. 


LIABILITIES.  107 

Liabilities  have  the  faculty  of  growing  day 
and  night  without  our  aid,  while  the  assets  of 
a  debtor  who  is  hard  up  and  behind,  acquire 
just  the  reverse  attribute.  Instead  of  growing 
in  value,  they  diminish  from  day  to  day.  The 
reason  of  this  is  obvious. 

The  man  who  keeps  his  liabilities  within 
proper  limits;  i.  e.,  within  the  limits  of  abso- 
lute safety  to  his  own  business,  enjoys  advan- 
tages, by  reason  of  his  good  standing,  which  he 
can  always  turn  to  profit.  To  the  man,  on  the 
other  hand,  who  is  too  much  in  debt  already, 
no  one  has  any  bargains  to  offer.  He  pays 
outside  prices  for  everything,  and  his  com- 
petitors get  the  bargains.  The  distance 
between  him  and  his  more  fortunate  neighbors 
is  constantly  widened,  and  their  relative  condi- 
tions may  be  seen  in  the  prosperity  of  the  one, 
and  the  growing  distress  of  the  other. 

The  man  whose  liabilities  are  out  of  propor- 
tion to  his  capital  and  business,  and  who  is 
therefore  constantly  harassed  to  meet  them, 
also  suffers  injury  from  more  remote  causes 
than  from  loss  of  confidence  and  credit.  The 
constant  worry  attendant  upon  this  condition, 
the  efforts  made  to  turn  a  corner  here  and 
there,  the  figuring  and  conniving  required  to 
pull  through,  all  these  things  engage  his  mind 
and  time,  and  withdraw  his  labor  from  its 
legitimate  functions.  A  certain  portion  of 
services  that  a  business-man  has  to  perform 


108  WHOM   TO   TEUST. 

are  an  expense  or  a  loss;  i.  e.,  they  are  not  pro- 
ductive. The  salesman  renders  productive 
service,  while  that  of  the  man  employed  to 
collect  the  bills  is  not  productive.  This 
belongs  to  the  item  of  expense.  If  the  bill 
had  been  paid  in  cash  when  the  sale  was 
made,  no  collector  would  have  been  neces- 
sary. Every  time  you  send  a  man  out  to 
collect,  it  costs  something,  and  whatever  time 
is  devoted,  in  a  business  way,  to  yesterday's 
transactions,  is  lost.  If  you  made  $1,000  last 
week  on  the  sale  of  goods,  it  will  never  be 
more,  and  you  can  never  make  it  more  by  any 
method  of  figuring;  the  more  time  you  spend, 
and  the  more  assistance  you  require  to  get  pos- 
session of  it,  the  less  you  will  eventually 
realize.  Now,  the  man  who  is  in  financial  dis- 
tress, per  force,  wastes  a  large  portion  of  his 
time  in  unproductive  efforts,  although  they 
may  enable  him  to  turn  one  more  corner.  But 
in  no  sense  can  it  be  contended  that  he  has  made 
or  earned  anything  or  added  to  his  capital. 

It  is  surprising  with  what  rare  persistence 
men  hold  on  long  after  their  condition  is  past 
hope.  Micawber  like,  they  are  always  waiting 
for  something  to  turn  up  to  help  them  out  of 
their  difficulties.  When  the  collapse  finally 
comes,  as  come  it  must,  all  are  agreed  that  it 
would  have  been  much  better  if  it  had  come 
sooner.  The  creditor  has  lost  money  by  the 
delay,  and  the  debtor  has  lost  time. 


LIABILITIES.  109 

No  definite  rule  can  be  laid  down  to  govern 
the  proper  proportion  of  liabilities  to  assets 
and  capital.  We  might  approximate  to  this  in 
some  one  line  of  business,  but  we  are  here  con- 
cerned with  business  in  general,  including  all 
branches.  All  we  can  say  is  this:  Keep  the 
mastership  of  your  business  in  your  own  hands, 
and  this  you  can  do  by  keeping  your  indebted- 
ness and  your  engagements  within  the  limits 
of  your  positive  ability  to  meet.  The  man  who 
does  this,  merits  and  is  entitled  to  our  confi- 
dence; the  man  who  does  not,  justly  lays  him- 
self open  to  suspicion  of  jeopardizing,  not  alone 
his  own  capital,  but  ours  as  well. 


110  WHOM   TO   TRUST. 

VOLUME  OF  BUSINESS  IN  PROPOR- 
TION TO  CAPITAL. 

This  question  we  can  discuss  only  in  a  gen- 
eral way,  and  the  considerations  will  be  such  as 
past  experience  and  observation  lead  us  to  take 
cognizance  of.  No  fault  can  be  found  with  us, 
as  a  mercantile  community,  on  the  score  of  not 
doing  business  enough  on  the  amount  of  our 
capital.  The  fault  is  rather  that  we  attempt 
too  much. 

The  function  of  money  is  to  facilitate 
exchanges  of  our  produce,  and  that  a  dollar  in 
the  hands  of  our  business  people  is  made  to 
perform  that  function  to  its  utmost  capacity, 
we  have  no  reason  to  question.  Rust  or  moth 
does  not  get  into  our  dollars  or  our  capital,  for 
it  does  not  remain  long  enough  in  one  place  to 
become  settled,  and  this  is  all  very  well  as  long 
as  the  dollar  is  kept  moving  and  no  unusual 
conditions  arise.  In  that  case,  the  person  pay- 
ing it  out,  and  the  party  receiving  it,  each,  in 
turn,  is  benefited.  If  nothing  ever  occurred 
to  check  the  circulation  of  money  at  some 
given  point,  then  we  might  rightfully  claim 
that  that  method  subserved  the  highest  pur- 
pose which  gives  it  the  largest  use  in  effecting 
exchanges,  either  for  past  or  present  trans- 
actions. Exchanges  are  made,  i.  e.,  goods  are 
bought  and  sold  on  the  basis  that  there  is  to  be 


BUSINESS   IN  PROPORTION   TO   CAPITAL.    Ill 

profit  in  the  operations;  therefore,  the  more 
transactions  or  trades  that  a  dollar  enables  ns  to 
make,  the  more  productive  it  becomes,  and  the 
greater  the  number  of  people  that  are  bene- 
fited. But  we  find  by  experience,  that  when 
money  reaches  the  point  where  the  maximum 
number  of  operations  are  effected  with  it,  and 
when  exchanges  are  made  with  the  greatest 
facility,  and  apparently  with  the  least  friction, 
which  condition  is  indicative  of  universal  and 
unlimited  confidence  in  each  other's  ability  to 
perform  them,  invariably  a  halt  may  be  looked 
for  which  will  shake  our  commercial  structure 
and  all  our  calculations  to  its  very  center. 
This  is  the  panic.  Every  man  who  has  passed 
through  one  or  more  commercial  crises  in  this 
or  other  countries,  if  he  has  been  at  all  observ- 
ant, has  noticed  that  financial  distress  to  a 
community  is  always  foreshadowed  by  excess- 
ive confidence,  and  an  abnormal  tendency  to 
speculation.  The  limit  of  the  purchasing 
power  of  a  dollar  is  exceeded  and  ignored,  and 
''promises  to  pay"  take  its  place  largely;  and 
along  the  whole  line  each  depends  on  the  other 
for  the  fulfillment  of  promises,  without  any 
really  tangible  basis.  They  are  notes  without 
security,  and  the  maker  pays  them  if  lie  can. 

In  the  nature  of  things,  in  the  buoyancy  of 
our  spirits  and  the  sanguineness  of  our  make-up 
as  a  business  people,  even  the  more  conserva- 
tive element  loses  its  equilibrium  during 


WHOM  TO  TRUST. 

periods  of  apparently  universal  prosperity  and 
confidence,  to  wake  up  at  last  and  see  the  bub- 
ble burst,  as  burst  it  must,  from  its  own  over- 
inflation.  The  greed  for  gain  is  too  strong 
to  be  resisted,  and  even  our  personal  experi- 
ences do  not  seem  to  profit  us.  Inflexible  laws 
govern  our  commercial  transactions,  as  all  else, 
and  we  should  not  be  unmindful  of  indications 
or  ignore  the  timely  warnings  that  are  always 
given  and  followed  by  the  wary. 

Whether  a  policy  of  safety  and  conservatism 
is  the  most  profitable  in  the  long  run  or  not,  is 
demonstrable  by  facts,  and  we  can  find  our 
proofs  by  pointing  to  houses  which  have  pur- 
sued this  policy,  and  to  the  wrecks  that  are 
strewn  all  along  the  shore  by  following  the 
opposite  course.  This  is  a  practical  test,  and 
we  need  no  better. 

Panics  do  not  come  and  go  with  the  regu- 
larity of  the  moon's  phases;  but  they  come, 
nevertheless,  in  cycles,  and  there  is  a  perio- 
dicity about  them  which  the  world  is  prone  to 
overlook.  The  same,  or  similar,  causes  that  led 
to  the  panic  of  1857  and  subsequent  panics, 
will  cause  others,  and  the  great  majority  of  us 
will  be  caught  in  them,  as  if  the  records  of  pre- 
ceding disasters  had  been  completely  destroyed. 

The  deductions  we  would  make  are  based  on 
the  experience  behind  us  and  the  probabilities 
before  us.  The  former  enables  us,  as  wise  busi- 
ness-men, to  establish  a  scientific  basis  by 


BUSINESS  IN  PROPORTION  TO  CAPITAL.    113 

which  to  govern  our  actions  with  reference  to 
the  probabilities  in  the  future.  Conditions, 
relations,  and  confidences  must  be  looked  at  in 
the  light  of  cause  and  effect,  and  the  good  busi- 
ness-man anticipates  the  effect  long  before  it  is 
produced.  There  is  science  in  business,  not- 
withstanding that  this  fact  has  not  dawned 
upon  the  multitude.  A  hap-hazard  method  is 
always  conditioned  upon  the  whims  of  chance, 
and  success  is  not  its  legitimate  offspring. 

What  amount  of  business  a  man  can  safely 
do  with  a  given  capital  would  be  as  difficult  to 
determine,  in  an  abstract  way,  as  to  determine 
the  chances  of  success  of  a  new  enterprise  with- 
out a  knowledge  of  the  necessary  facts  and 
surrounding  conditions.  We  know,  as  experi- 
enced credit-men,  that  when  a  concern  does  so 
much  business  that  it  can  not  pay  its  bills 
promptly,  it  is  not  safe  to  extend  credit  to  it. 
Over-buying,  over-trading,  and  not  the  least, 
over-trusting,  are  the  greatest  evils  we  have  to 
contend  with.  The  only  rule  that  can  be  laid 
down  to  guide  us  safely,  is  to  do  all  the  busi- 
ness we  can,  but  stop  short  of  the  point  where 
the  fulfillment  of  our  promises  is  dependent 
upon  the  strict  observance  of  the  promises  of 
others  to  us. 

In  other  words,  we  must  keep  ourselves  in 
condition  to  meet  our  obligations,  whether 
others  meet  theirs  or  not.  A  merchant  is  not 
compelled,  by  this  rule,  to  have  the  cash  in 

8 


114  WHOM   TO   TRUST. 

bank  at  all  times  for  all  Ms  debts.  That  is 
not  necessary.  A  certain  percentage  of  ac- 
counts and  assets  can  always  be  relied  on  and 
realized  from.  The  liabilities  should  be  kept 
within  the  limit  of  this  percentage,  leaving  the 
balance  as  a  surplus,  or  as  the  representative 
of  capital  invested. 


ANTECEDENTS.  115 


ANTECEDENTS. 

A  man's  antecedents  are  found  in  his  written 
and  unwritten  biography.  Like  a  barometer, 
they  unerringly  indicate  and  give  us  an  idea  of 
his  character,  ability,  honesty;  his  good  and 
bad  traits,  and  summing  up,  we  are  in  posses- 
sion of  valuable  data  for  judging  his  future,  and 
our  chances,  if  thrown  with  him. 

Because  a  man  has  once  failed  in  business  is 
nothing  in  itself,  in  this  country,  at  least.  A 
man  may  come  out  of  a  wreck  an  honest,  capa- 
ble, and  very  often  a  better,  man,  by  reason  of 
his  experience.  Force  of  circumstances,  joined 
to  a  little  inexperience  and  imprudence,  may 
have  resulted  in  his  bankruptcy;  but  in  a  case 
of  this  kind,  where  the  integrity  of  the  party 
has  been  kept  inviolate,  the  business  commun- 
ity is  ever  ready  to  overlook  past  mistakes, 
and  bestow  upon  him  its  confidence  in  the 
future.  But  the  case  must  be  a  clear  one,  and 
his  integrity  must  stand  out  uncompromisingly; 
it  must  be  "net,  and  no  discount."  Where 
such  are  the  facts,  reasonable  hope  of  eventual 
recovery  may  be  rightfully  entertained,  and 
our  support  be  extended. 

On  the  other  hand,  where  the  failure  is  the 
result  of  gross  violation  of  business  principles 
and  honesty,  as  is  often  the  case,  the  bankrupt 
should  forever  forfeit  all  claims  on  the  confi- 


116  WHOM   TO   TRUST. 

dence  of  the  community,  and  were  this  more 
universally  adhered  to,  a  wholesome  influence 
would  be  exerted  on  all  classes. 

Inexperience  being  largely  the  cause  of  many 
men's  downfall  in  early  life,  there  being  no 
other  blemish  on  their  characters,  the  business 
world  is  always  ready  to  forgive  and  help  them 
again.  Our  charitableness  toward  the  honest 
unfortunate  is  a  grand  feature  in  our  modern 
mercantile  life,  and  although  it  is  actuated  by 
policy  and  self-interest,  that  need  not  detract 
from  its  merits.  A  broad  Christian  sentiment 
underlies  it  withal. 

There  is  a  tendency  to  make  light  of  failures 
by  both  the  creditor  and  the  bankrupt.  The 
bankrupt  thinks  he  will  do  better  in  the  future, 
and,  profiting  by  experience,  will  soon  be 
enabled  to  get  on  his  feet  again — better  than 
ever.  But  he  counts  without  his  host.  Except- 
ing the  out-and-out  thief,  men  are  not  benefited 
by  their  own  failures.  Although  the  debtor 
finds,  usually,  no  difficulty  in  compromising 
with  his  creditors  on  a  reasonable  basis,  such  as 
the  assets  warrant,  thus  enabling  him  to  con- 
tinue his  business;  yet,  of  the  majority  it  may 
be  said,  that  their  entire  future  is  blighted,  and 
that  they  never  recover. 

To  a  few,  failure  gives  additional  zest,  and  it 
would  seem  that  it  was  the  key  to  subsequent 
brilliant  success,  but  we  think  the  failure 
might  have  been  omitted  without  peril  to  their 


ANTECEDENTS.  117 

final  outcome.  Failure  always  means  a  set- 
back and  loss  of  time,  also  loss  of  confidence, 
and  the  latter  can  only  be  regained  in  the 
course  of  time.  Going  along  safely  and 
cautiously,  though  somewhat  slower,  arid 
avoiding  failure,  is  assuredly  the  shortest  road, 
after  all,  to  success,  and  the  attainment  of  our 
desires. 

The  time  allotted  to  a  man  in  business  for 
permanently  establishing  himself,  and  gaining 
an  undisputed  foothold,  is  limited  to  but  few 
years — thirty,  at  most,  and  this  does  not  admit 
of  many  or  any  serious  drawbacks.  The  time 
is  too  short,  and  most  men  find  it  so. 

We  like  to  see  men  ambitious  and  energetic. 
These  are  characteristics  of  our  people.  We 
make  haste  to  get  rich;  but  whether  our  undue 
haste  does  not  lay  waste  a  large  portion  of  our 
efforts,  and  result  in  irretrievable  loss  of  time, 
is  a  matter  for  serious  consideration.  Less 
haste  to  accomplish  our  purposes  as  business  - 
men,  more  conservatism  and  caution,  would 
certainly  advance  the  interest  of  trade  and 
traders  at  large. 

The  applicant  for  credit  favors,  if  he  has  ever 
failed,  or  whatever  his  past  life  may  have  been, 
has  left  a  biography  of  himself  that  must  be 
carefully  read.  All  the  facts  will  be  enumer- 
ated therein,  and  will  indicate  to  the  credit-man 
the  course  he  should  pursue. 


118  WHOM  TO  TRUST. 


COMPETITION. 

With,  the  growth  of  population  in  every  di- 
rection, east,  west,  north,  and  south,  opportuni- 
ties are  opened  up  for  business  ventures,  and  as 
fast  as  a  town  or  village  is  located,  two  stores 
are  ready  to  start  where  only  one  is  really 
needed.  We  are  accumulating  capital  very 
fast,  and  there  is  no  nook  or  corner  anywhere, 
in  the  remotest  part  of  this  continent,  that  does 
not  exert  a  magnetic  influence  on  capital  the 
moment  a  chance  for  its  employment  is  offered. 
There  is  no  enterprise  so  large  that  it  can  not 
be  capitalized,  or  so  small  that  it  does  not 
attract  men  to  it  with  the  hope  of  making  a 
living. 

The  man  with  energy,  experience,  and  a  little 
capital,  who  drives  his  stakes  first  in  any  new 
town — the  so-called  pioneer — has  considerable 
advantage,  and  his  prestige  makes  it  more  diffi- 
cult for  others  to  get  a  foothold. 

Every  new  town  is  always  going  to  be  the 
town,  and  in  the  expectation  that  it  will  out- 
strip every  other,  more  stores  are  generally 
started  than  can  find  profitable  remuneration. 
Of  course,  the  law  of  supply  and  demand  regu- 
lates this  in  due  course  of  time,  and  only  the 
fittest  survive. 

Competition  is  necessary,  not  for  the  seller, 
but  for  the  buyers,  and  as  the  buyers  constitute 


COMPETITION.  119 

by  far  the  larger  class,  we  must  look  for  the 
greatest  good  to  the  greatest  number.  It  pre- 
vents robbery,  and .  every  merchant  would  be  a 
licensed  robber  of  the  people  if  he  could,  and  if 
competition  did  not  prevent  him. 

In  regard  to  selling  goods  and  what  profit  a 
dealer  should  be  allowed  to  make,  or  be  entitled 
to,  there  is  no  established  rule  or  uniformity  of 
practice.  Every  man  is  a  law  unto  himself, 
and  is  governed  solely  by  circumstances.  His 
aim  is  to  make  all  he  can,  and  as  quickly  as  he 
can,  legitimately,  of  course.  But  this  only 
means  that  he  will  sell  at  a  1 0  per  cent,  profit  if  he 
is  forced  to.  Left  to  his  own  sense  of  right  and 
justice,  100  or  300  percent,  would  only  be  a  fair 
remuneration  for  his  time,  employment  of  his 
capital,  and  sacrifice  he  is  making  for  the  ac- 
commodation of  the  public.  What  gas  and 
sugar  trusts  and  other  monopolies  aim  to  ac- 
complish by  their  manipulations,  is  to  remove 
competition.  This  done,  and  they  have  it  in 
their  power  to  exact  any  price  and  profit  within 
the  ability  of  the  people  to  pay.  Every  dealer, 
retail  or  wholelsale,  would  constitute  himself 
into  a  perpetual  trust,  if  he  could,  and  he  does 
so  when  and  wherever  he  has  the  field  to  himself. 

Much  can  be  said  on  the  good  and  bad  side 
of  competition;  the  preponderance  of  the  argu- 
ment, however,  rests  on  the  side  of  its  good 
offices  in  behalf  of  the  many.  But  what  con- 
cerns us  here,  chiefly,  is  its  effect  on  our  cus- 


120  WHOM  TO  TEUST. 

tomer,  and  how  far  his  chance  for  success  is 
thereby  lessened.  As  for  improving  his  chances, 
that  could  hardly  ever  be  possible,  though  in 
common  parlance  we  say,  competition  is  the  life 
of  trade.  While  this  is  so,  it  does  not  mean 
that  competition  enables  you  to  charge  more 
profit.  Quite  the  reverse.  It  makes  you  give 
more  goods  and  better  service,  and  the  public 
at  large  is  the  gainer  by  the  stimulus  that  com- 
petition gives  to  trade,  and  the  greater  the  com- 
petition is  the  nearer  to  cost  will  you  be  obliged 
to  sell.  The  question,  therefore,  has  much  to 
do  with  the  man  or  firm  we  have  trusted,  or  are 
about  to  trust,  with  our  goods.  Without  oppo- 
sition, our  debtor's  chance  of  success  could 
hardly  be  questioned,  and  the  creditor,  other 
things  not  being  unfavorable,  would  be  justified 
in  considering  the  risk  a  good  one.  On  the 
other  hand,  if  in  his  locality  the  business  is 
overdone,  and  the  custom  is  hardly  sufficient  to 
warrant  so  many  dealers,  it  then  becomes  a 
question,  with  the  creditor,  of  comparative 
ability,  financial  and  otherwise,  of  the  appli- 
cant for  credit. 

It  will  appear,  then,  that  a  man's  surround- 
ings, and  their  bearing  on  his  prospects,  must 
be  taken  into  consideration.  For  a  new  firm 
to  start  into  business  in  opposition  to  old,  estab- 
lished houses,  is  always,  more  or  less,  a  hazard- 
ous undertaking;  but  the  risk  is  not  confined 
to  the  firm  alone,  since  the  creditors  are 


COMPETITION.  121 

always  made  participants  in  it,  and  this  fact 
must  be  borne  in  mind.  It  is  not  an  easy  mat- 
ter to  establish  a  paying  business  in  the  face  of 
old  and  well-known  concerns;  nor  will  the  lat- 
ter sit  calmly  by  and  let  the  new-comer  get  a 
foothold.  His  success  will  depend  on  his  finan- 
cial and  general  ability,  as  compared  with  that 
of  his  competitors. 

We  are  made  to  feel  reasonably  secure,  how- 
ever, in  a  new  firm  that  has  bought  out  and 
succeeds  an  old-established  stand.  We  know, 
in  this  case,  that  the  trade  is  already  built  up, 
and  that  under  a  fairly  good  administration  it 
will  continue  to  run  in  the  same  groove.  A  new 
firm  has  to  create  confidence  first  before  a  line  of 
customers  can  be  depended  on,  but  the  success- 
ors to  an  old  house  start  in  with  a  lucrative 
patronage  to  begin  with.  They  get  the  benefit 
of  years  of  advertising  and  of  acquaintance;  in 
short,  they  start  with  a  prestige  that  would 
otherwise  take  years  to  acquire. 

All  these  points  are  of  vital  importance  to 
him  who  is  about  to  extend  credit.  The  pro- 
fessional manager  of  credits  gives  them  careful 
consideration.  Every  item  of  advantage  and 
disadvantage  that  the  applicant  for  credit  pre- 
sents must  be  carefully  weighed,  and  if  the 
balances  do  not  show  in  his  favor,  it  is  not 
alone  your  privilege  but  your  duty,  as  a  good 
business-man,  to  decline  the  proffered  favor. 


WHOM  TO  TRUST. 


PUNCTUALITY. 

Punctuality  is  the  essence  of  good  business 
methods.  It  is  the  foundation  wall  on  which 
great  structures  are  built.  It  is  the  highway 
to  success  in  life,  whatever  may  be  the  occupa- 
tion. Head  over  the  lives  of  successful  mer- 
chants, and  of  men  in  every  department,  and 
we  shall  find  this  trait  invarfably  possessed  by 
them  and  forcefully  demonstrated.  The  man 
of  business  owes  it  not  alone  to  others  that  he 
be  punctual  in  his  engagements  and  in  the  per- 
formance of  his  duties,  but  also  to  himself;  he 
not  alone  puts  others  to  inconvenience  and  loss 
by  his  lack  of  promptness,  but  he  impairs  his 
own  chances  of  success.  No  great  merchant, 
and  we  might  say,  no  truly  great  man,  was  ever 
known  to  be  without  this  quality  of  punctual- 
ity in  a  marked  degree,  and  who  did  not  prac- 
tice and  value  it  as  a  cardinal  virtue. 

In  the  matter  with  which  we  have  to  do,  viz. , 
credits,  it  is  an  all-important  factor,  and  proba- 
bly there  is  no  other  that  exerts  so  great  an 
influence  on  the  affairs  of  commerce,  in  which 
we  are  all,  directly  or  indirectly,  interested. 
If  every  man  doing  business  had  in  him  the 
elements  of  promptness,  of  punctual  observ- 
ance of  his  promises,  whether  it  be  to  pay  a 
bill  or  fulfill  a  contract,  much  of  our  tribulation 
and  distress,  and  most  of  our  failures,  would  be 


PUNCTUALITY. 


avoided.  The  man  who  has  an  inherent  sense 
and  desire  to  be  prompt,  or  who  has  made 
punctuality  a  maxim  for  himself  in  the  conduct 
of  his  affairs,  will  make  a  halt  when  he  finds 
that  adherence  to  his  principles  is  no  longer 
possible.  He  rightly  and  prudentially  con- 
cludes that  the  business  had  better  be  aban- 
doned or  reconstructed  on  a  different  basis. 
A.  T.  Stewart  adopted  the  C.  O.  D.  plan  in  his 
early  career  as  a  retail  dry-goods  merchant,  as 
a  result  of  lack  of  punctuality  on  the  part  of 
his  customers.  Having  a  note  to  pay  one  day, 
he  depended,  as  we  all  do,  and  as  a  legitimate 
resource,  on  promises  of  those  indebted  to  him. 
But  these  promises  were  not  kept,  and  Mr. 
Stewart  was  obliged  to  sacrifice  part  of  his  stock 
to  realize  money  in  time  to  meet  his  note.  He 
wisely  concluded  that  where  so  much  uncer- 
tainty and  unreliability  existed,  it  was  necessary 
to  adopt  some  other  method  of  conducting  his 
business,  to  avoid  periodical  distress  —  and  he 
did.  Every  good  business-man  looks  upon 
lack  of  punctuality  in  himself  as  synonymous 
with  loss  of  personal  integrity,  and  this  governs 
equally  in  large  and  small  matters.  The  man 
who  is  remiss  in  the  minor  transactions  is  not 
to  be  relied  on  in  large  ones,  although  policy 
and  self-interest  may  prompt  him  to  the  punc- 
tual fulfillment  of  the  latter. 

The  man  who  is  not  prompt  can  not  be  said 
to  be  strictly  honest.     If  you  sell  a  man  goods 


124  WHOM   TO  TRUST. 

on  sixty  days'  time,  you  calculate  on  receiving 
payment  at  maturity  of  the  account,  and  you 
have  a  right  to  expect  and  demand  it.  His 
failure  to  keep  his  promise  is  liable  to  cause 
your  failure  to  keep  yonrs.  Being  "  behind 
time,"  is  often  as  ruinous  to  the  creditor  as 
being  made  the  victim  of  bare-faced  fraud. 

We  respect  the  man,  and  we  have  a  high 
appreciation  of  his  business  tact,  who  is  always 
prompt  in  his  dealings  and  his  payments  with 
us,  and  it  is  an  appreciation  which  more 
should  strive  to  merit.  But  a  large  number 
of  people  in  business  seem  not  to  have  any 
conception  of  this  great  requisite.  They  were 
born  "behind  time,"  presumably,  and  will 
always  be  "behind  time,"  even  in  making  their 
exit. 

We  all  have  on  our  books  customers  who 
have  always  been  ' '  slow  pay, ' '  and  who  are  not 
likely  to  ever  mend  their  ways.  It  is  a  chronic 
disease  with  them,  a  congenital  deformity,  as 
doctors  would  say,  but  in  ordinary  parlance, 
"  pure  cussedness  "  is  more  to  the  point.  The 
community  seems  to  know  their  failing,  and 
indulges  them,  very  much  to  its  own  detriment 
and  that  of  good  business  rules.  It  is  fully  as 
reprehensible  to  be  lax  in  exacting  promptitude 
as  it  is  to  be  lax  in  its  practice  yourself.  The 
large,  representative  houses  have  it  in  their 
power  to  do  much  educational  work  and  to 
exert  a  potent  influence  on  the  business-men 


PUNCTUALITY.  125 

of  the  country  in  the  direction  of  instilling 
good  principles  into  their  methods,  by  simply 
demanding  and  insisting  on  punctual  compli- 
ance with  terms  and  engagements.  Some  few 
of  our  larger  firms  have  done  more  in  this  way, 
in  educating  the  business  public  than  have  all 
other  influences  combined,  and  they  rightfully 
pride  themselves,  and  are  entitled  to  credit,  as 
educators  and  public  benefactors.  Discipline 
of  this  kind  naturally  results  in  mutual  benefit, 
and  in  the  private  as  well  as  the  public  good. 

In  making  credits,  the  applicant's  reputation 
for  promptness  should  be  carefully  inquired 
into.  Considerable  latitude  is  permissible  and 
is  warrantable  even  by  the  most  conservative 
houses.  All  other  conditions  being  favora- 
ble, and  we  find  the  applicant  is  simply  slow 
because  uhe  is  built  that  way,"  we  need  not 
refuse  him.  We  can  make  him  prompt  with 
us  if  we  set  out  to  do  it,  and  do  it  we  should, 
by  all  means. 

On  the  other  hand,  the  applicant  whose  record 
shows  unsatisfactory  payments,  and  who  has 
no  established  reputation  either  for  ' '  chronic 
slowness"  or  financial  standing,  must  be  closely 
scrutinized,  and  we  must  take  the  benefit  of 
existing  doubts  ourselves. 

In  the  case  of  customers  already  on  our  books, 
this  ma}^  be  said:  We  take  for  granted  that  the 
course  of  business  is  onward  and  upward — not 
backward.  No  man  ever  failed  from  the  ordi- 


126  WHOM   TO   TRUST. 

nary  causes  who  did  not  give  timely  warning 
by  hoisting  the  signal  of  distress  long  before 
the  event.  When  a  customer,  therefore,  who 
has  always  been  punctual  in  his  engagements, 
goes  back  on  his  good  record,  there  is  generally 
cause  for  alarm,  and  a  prompt  investigation  is  in 
order. 


PRODUCTIVE   OR   NON-PRODUCTIVE.         127 


PRODUCTIVE  OR  NON-PRODUCTIVE. 

By  this  is  meant  whether  the  principals  of  a 
business  are  themselves  workers,  and  are  earn- 
ing their  daily  wages.  If  the  proprietor  be  a 
hard-working  man  himself,  and  an  equivalent 
is  rendered  to  the  business  in  services  for  money 
drawn  for  living  expenses,  the  conditions  may 
be  regarded  as  favorable  in  this  case.  But  if 
the  reverse  is  true,  and  the  proprietor  figures 
that  the  business  owes  him  a  living  without  any 
equivalent  being  rendered  by  him,  thus  neces- 
sitating the  employment  of  help  and  the  paying 
of  wages,  then  the  conditions  must  be  regarded 
as  unfavorable.  Few  concerns  can  thrive  under 
this  latter  method  for  reasons  even  outside  of 
the  wages  paid,  which  the  proprietor  ought  to 
earn  himself.  Take  a  small  store,  for  instance, 
carried  on  by  man  and  wife  assisting  each 
other,  as  we  often  find  the  case,  and  they  uni- 
formly succeed  in  their  way.  They  both  earn 
wages,  and  their  combined  earnings  are  more 
than  their  personal  expenses.  What  would 
otherwise  be  paid  out  in  salaries,  and  be  a  drain 
on  the  business,  is  made  a  source  of  accumula- 
tion to  their  capital.  Husband  and  wife  who 
thus  work  together,  can  safely  be  trusted,  since 
we  may  rely  on  economical  management  and 
frugal  habits.  The  ambition  that  prompts 
them  in  uniting  their  industry,  also  gives 


128  WHOM   TO   TRUST. 

assurance  of  their  eagerness  to  save  and  accum- 
ulate. 

If  a  man  has  a  trade  at  which  he  can  work  in 
conjunction  with  a  merchandising  business,  his 
chances  may  be  considered  at  a  premium.  As 
a  matter  of  fact,  a  good  tinner,  starting  a  tin- 
shop  and  hardware  store  combined,  is  a  good 
risk  if  he  only  has  a  set  of  tools  to  commence 
with,  and  as  a  matter  of  course,  has  good  char- 
acter and  habits.  He  can  always  earn  good 
wages  at  the  bench,  and  does  not  have  to 
depend  on  the  mercantile  part  of  the  business 
for  his  living  expenses.  The  same  holds  good 
in  any  line  where  the  proprietor  works  at  his 
trade  in  such  connection. 

On  the  other  hand,  a  man  in  business  who 
neither  earns  wages  as  workman  or  as  salesman, 
is  out  of  pocket  the  wages  he  pays  an  employe 
for  taking  his  place,  and  this  single  item,  in  the 
course  of  a  few  years,  amounts  to  a  considera- 
ble sum  in  itself.  Nor  is  this  all.  The  man 
who  is  industrious  and  keeps  himself  constantly 
employed  in  his  business,  necessarily  keeps  it 
in  better  running  order.  He  also  requires  less 
for  his  personal  wants  than  the  man  who  takes 
his  leisure;  and  again,  by  giving  close  attention 
to  his  business,  fewer  opportunities  are  afforded 
for  squandering  money  in  the  various  ways 
that  beset  the  idle  man.  The  difference  in  the 
personal  expenditures  between  the  two  types 
of  men  will  naturally  be  considerable,  and  the 


PRODUCTIVE   OK  NON-PEODUCTIVE.        129 

annual  savings  of  the  one  over  the  other,  added 
to  his  capital,  will  bring  about  a  vast  change  in 
their  relative  financial  conditions  in  the  course 
of  a  few  years. 

The  importance  of  these  points  is  not  always 
considered,  but  should  be.  The  careful  credit- 
man  does  not  ignore  them. 


130  WHOM  TO  TRUST. 


DOING  BUSINESS  AS  AGENTS. 

The  class  of  persons  we  refer  to  are  those 
who  act  as  agents  only  in  name,  and  not  in  fact. 
In  it  are  included  mainly  such  persons  as  have 
failed  in  business,  and  who  have  not  been  able 
to  get  a  discharge  or  release  from  their  indebt- 
edness, which  still  hangs  over  them.  To  enable 
them  to  do  business  without  the  interference  of 
old  creditors,  they  resort  to  a  legal  technicality, 
and  pretend  to  do  it  for  someone  else,  and 
either  use  some  other  name,  or  their  own  as 
agent.  This  class  is  quite  large.  In  many 
cases  the  business  is  done  in  the  wife1  s  name, 
the  husband  being  nominally  hired  to  manage 
it  for  her. 

There  are  cases  where  this  course  is  probably 
justifiable,  all  things  considered,  and  where  cir- 
cumstances make  it  necessary,  as  a  measure  of 
self -protection;  but  these  cases  are  rare,  and  the 
motives  or  reasons  are  easily  ascertained.  Gen- 
erally the  measure  is  resorted  to  to  keep  from 
creditors  their  honest  belongings,  and  to  keep 
property  and  earnings  out  of  the  law' s  reach. 
With  these  facts  before  us,  which  furnish  us  a 
record  of  the  man's  character,  we  start  in  fore- 
warned, and  our  confidence  is  not  likely  to  suf- 
fer abuse  for  the  reason  that  we  give  it  very 
charily.  In  many  cases  some  friend  or  well-to- 
do  relative  is  willing  to  help  the  man  by  allow- 


DOING   BUSINESS   AS  AGENTS.  131 

ing  him  to  do  business  in  his  name,  and  repre- 
senting him  as  his  agent.  The  friend  or  rela- 
tive in  this  instance  assumes  the  sponsorship  of 
the  concern,  and  with  his  name  also  lends  his 
property;  that  is  to  say,  he  makes  himself 
responsible  for  the  acts  and  debts  of  the 
agent.  The  agent's  individual  responsibil- 
ity, character,  etc.,  whatever  these  may  be, 
concern  us  only  indirectly.  We  are  con- 
cerned entirely  with  the  responsibility  and 
integrity  of  the  principal,  who  is  usually  a 
man  of  means  and  of  trustworthy  character. 
We  may  state  it  as  a  fact  that  losses  are  seldom 
sustained  from  this  source,  and  the  reasons  are 
quite  obvious.  The  help  being  extended  out  of 
friendship  or  kinship,  and  very  often  without 
expectation  of  sharing  in  the  profits,  the 
arrangement  is  one  of  friendly  aid  simply,  and 
few  men  would  so  abuse  the  confidence  of  such 
friends  as  to  involve  them  in  losses  on  their 
account.  It  may  be  further  assumed  that 
the  agent  is  placed  under  certain  restrictions  in 
the  control  of  his  business,  so  that  the  princi- 
pal feels  protected,  and  also  that  the  agent  con- 
fines his  transactions  within  the  limits  of  abso- 
lute safety. 

In  determining  this  class  of  credits,  we  act 
cautiously  at  the  outset,  because,  so  far  as  the 
agent  is  concerned,  we  should  not  extend  credit 
at  all,  and  in  looking  up  the  principal,  we  are 
naturally  painstaking  in  our  inquiries  regarding 


132  WHOM   TO   TRUST. 

his  standing,  and  this  precaution  is  apt  to  lead 
us  to  safe  conclusions  in  regard  to  the  extent  of 
the  applicant' s  claim  to  our  confidence. 

But  there  is  another  phase  of  this  agency 
business,  and  one  requiring  much  greater  care 
on  the  part  of  the  credit-man.  It  is  where  the 
man  does  business  in  his  wife' s  name.  In  most 
cases,  the  man  has  failed,  and  fraudulently  con- 
veyed his  property  and  assets  to  his  wife. 
Practically,  he  has  control  of  the  property,  and 
manages  the  business  as  before,  using  his  wife's 
name  as  a  figure-head  only.  The  logical  con- 
clusion in  regard  to  this  stamp  of  individuals  is 
that  the  acquisition  of  property  by  any  means, 
and  the  comfort  of  their  families,  at  all  hazards, 
is  the  chief  aim  before  them,  and  they  do  not 
scruple  to  attain  these  results,  even  at  the  loss 
of  character  and  name.  But  what  he  has 
secured  is  only  a  nest-egg,  and  you  will  find 
him  very  cautious  how  he  ventures  any  of  his 
capital  or  property.  He  must  do  business  to 
support  the  family,  and  in  order  to  keep  intact 
what  he  has;  but  he  does  a  safe  business,  per 
force,  as  sellers  are  not  eager  to  give  accomoda- 
tions. 

Where  the  wife  is  the  figure-head  of  a  con- 
cern, for  the  reasons  stated  above,  and  where 
our  safety  as  creditors  depends  on  her,  the 
nature  of  the  risk  must  be  considered  apart 
from  the  ordinary  way.  She  has  property  in 
her  possession  subject  to  execution,  and  we  are 


BUSINESS  AS  AGENTS.  133 

safe  so  far  as  this  goes,  and  our  claims  are  cov- 
ered by  it.  But  in  case  of  her  failure,  our 
chances  would  be  worth  nothing  beyond  what 
could  be  realized  from  property  in  sight.  A 
judgment  would  be  a  dead  letter  against  her,  as 
she  would  never  again  enter  the  arena  of  busi- 
ness life.  She  would  drop  out  and  be  lost  to 
creditors  for  all  time.  With  a  man,  on  the 
other  hand,  under  ordinarily  favorable  circum- 
stances, the  creditor  is  offered  a  future,  and 
may  reasonably  calculate  that  a  certain  per- 
centage of  his  bankrupt  debtors  will  eventually 
be  good  for  something.  Experience  proves  that^ 
worthless  claims  of  to-day  against  young  and 
middle-aged  men  of  average  business  capacity, 
have  a  prospective  value,  which  can  not  be  said 
of  women  under  above  circumstances. 

Ordinary  prudence  will  suggest  our  being 
cautious  in  extending  them  credit.  We  must 
keep  considerably  inside  of  the  prescribed 
limit. 


134  WHOM  TO  TRUST. 


PARTNERSHIPS. 

Many  a  good  man  has  found  out  to  Ms  sor- 
row that  partnerships  are  many-sided,  and  not 
all  they  might  be.  In  union  there  is  strength; 
but  the  union  must  exist  in  fact,  as  well  as  in 
name.  A  simple  yoking  together  of  two  or 
more  forces  does  not  always  have  the  desired 
effect,  and  in  partnerships,  the  forces  can  never 
be  measured  beforehand  in  their  relation  to 
each  other.  It  is  always  a  matter  of  experi- 
ment first,  and  only  experience  and  time  can 
determine  the  wisdom  or  in  judiciousness  of  a 
copartnership. 

Union,  or  partnership,  in  this  case,  to  fulfill 
its  highest  mission,  must  mean  harmony, 
mutual  confidence,  and  unity  of  interests  and 
joint  effort  for  a  given  purpose.  Its  very 
essence  and  vitality  rest  in  concert  of  action, 
and,  wanting  in  this,  the  combination  must,  of 
necessity,  be  a  failure. 

In  a  large  enterprise,  partnerships  of  two  or 
more,  when  made  for  the  purpose  of  combining 
capital  and  joining  forces,  each  partner  being 
qualified  for  a  special  task  or  department,  are 
for  the  good  of  all  concerned,  and  the  great 
success  of  many  of  our  large  houses  is  due  to 
fortunate  partnership  associations.  I  say  fort- 
unate, because  whether  partners  are  going  to 
be  congenial,  and  in  every  respect  well-mated 


PARTNERSHIPS.  135 

and  of  benefit  to  each  other  and  the  business, 
is  always  a  matter  that  defies  pre-judgment. 
Time  alone  can  solve  that  problem.  In  smaller 
copartnerships  the  experiment  is  even  more 
hazardous.  There  is  greater  reason  for  part- 
ners to  clash.  The  work  can  not  be  divided  so 
as  to  give  to  each  a  particular  department  to 
attend  to,  and  one  or  both  are  liable  to  be  dissat- 
isfied, though  notwithstanding  their  disagree- 
ments, they  may  continue  together  indefinitely. 
That  this  kind  of  an  alliance  can  not  accom- 
plish what  with  perfert  concert  of  action  it 
would  be  capable  of,  is  self-evident,  and  that , 
there  are  a  great  many  such,  needs  no  aifirma- 
tion. 

There  are  always  risks  in  forming  partner- 
ships. In  selecting  any  two  men,  we  could 
hardly  hope  to  find  both  equally  honest, 
equally  competent,  or  equally  energetic. 
Though  truth  will  prevail  and  honesty  is  the 
best  policy,  nothing  prevails  as  against  an  un- 
scrupulous partner.  The  honest  man  stands 
no  show  in  such  an  unequal  union,  as  many 
good  men  have  discovered. 

Partnerships  concern  us  here,  however,  in 
a  more  specific  manner.  In  extending  credit 
to  partnership  concerns,  our  attention  should  be 
directed  to  whether  the  association  is  a  good 
one,  all  things  considered,  and  whether  the 
purpose  for  which  partnerships  should  be 
formed  has  been  fulfilled;  also,  whether  all  the 


136  WHOM   TO   TRUST. 

parties  are  producers;  i.  e.,  workers,  and  earn- 
ing wages,  or  whether  they  are  simply  con- 
sumers. 

The  next  question  of  importance  is  to  ascer- 
tain whether  the  business  is  sufficiently  large 
to  warrant  the  family  and  personal  expenses  of 
two  or  more  partners.  A  great  many  of  the 
smaller  partnership-firms  suffer  too  large 
and  constant  a  drain  on  their  earnings  for 
family  support,  thus  leaving  no  chance  for  ac- 
cumulation of  capital  or  enlargement  of  the 
business.  Under  these  adverse  circumstances, 
concerns  can  not  get  ahead,  and  more  than  that, 
it  is  evident  that  the  ordinary  vicissitudes  in 
trade  and  temporary  depressions  are  liable  to 
cause  both  the  firm's  small  capital  and  also  the 
creditor's  money  to  be  eaten  up  while  waiting 
for  a  turn.  The  earnings  being  consumed  as  fast 
as  made  during  favorable  periods,  there  is  never 
a  surplus  fund  to  draw  against.  The  establish- 
ment of  a  successful  business  demands  constant 
.accumulation  of  capital  and  facility  for  growth. 
The  nature  of  business  is  to  be  progressive  and 
aggressive.  When  firms  stand  still,  it  is 
because  they  cari!t  do  otherwise,  for  one  reason 
or  another,  and  this  condition  can  not  be  con- 
sidered a  healthy  one. 

Every  man,  employer  and  employe  alike, 
must  earn  what  he  draws,  and  give  an  equiva- 
lent for  what  the  business  pays  him.  A  clerk 
is  paid  a  salary  which  he  is  supposed  to  earn; 


PARTNERSHIPS.  137 

the  employer  must  likewise  earn  what  he 
draws,  though  he  is  not  expected  to  draw  all 
the  business  earns;  in  fact,  his  success  in  busi- 
ness demands  that  he  draw  as  little  as  he  can, 
so  as  to  admit  of  the  largest  possible  addition 
to  his  capital  from  year  to  year. 

Forming  a  copartnership  is  one  of  the  most 
important  steps  in  a  man' s  life.  I  am  talking 
now  of  the  honest,  right-minded  man.  The 
scoundrel,  who  is  ever  ready  to  inveigle  anybody 
and  everybody  into  his  spider' s  web,  is  never  the 
one  to  suffer,  even  if  he  has  anything  at  stake. 
The  honest  partner,  to  avoid  compromising  his 
honor  and  his  name,  is  always  the  loser. 
Years  of  toil  and  accumulation  of  capital  are 
sacrificed,  and  the  sooner  this  is  done  and  the 
association  ended,  the  better,  unless  he  is  will- 
ing to  be  dragged  to  the  level  of  the  other. 
Make  your  selection  advisedly,  and  not  until 
you  know  thoroughly  the  man  about  to  be 
your  associate;  do  not  enter  hastily  into  a 
union.  "  Marry  in  haste,  repent  at  leisure,"  is 
a  trite  old  saying,  and  apropos  in  copartnerships. 
The  antecedents  of  your  associate-to-be  must 
be  without  blemish.  Not  only  that,  but,  if  he 
is  well-advanced  in  years,  take  note  of  whether 
he  has  been,  thus  far,  successful  or  otherwise 
in  his  former  undertakings.  It  may  be  said 
that  because  a  man  has  been  unfortunate  or 
unsuccessful,  this  should  not  necessarily  operate 
against  him.  The  answer  to  this  can  best  be 


138  WHOM  TO  TRUST. 

given  by  quoting  the  advice  of  one  of  the 
shrewdest  and  most  successful  merchants  of 
the  last  generation:  "Avoid  unfortunate  men 
in  your  business  affairs,"  or  words  to  that 
effect.  We  may  not  believe  in  the  doctrine  of 
fatality  in  its  application  to  business,  but 
experience  and  observation  have  taught  us  that 
the  advice  is  sound,  and  it  follows  that  we 
should  struggle  to  avoid  the  black  mark,  "An 
unfortunate  man." 


DOUBTFUL   CREDITS.  139 


DOUBTFUL  CREDITS. 

Many  cases,  after  the  most  careful  scrutiny 
and  consideration,  will  be  of  a  nature  to  make 
a  decision,  pro  or  con,  difficult  to  arrive  at.  If 
it  were  a  question  of  making  a  cash  loan  in 
these  cases,  we  should  not  be  long  in  deciding, 
but  the  trouble  is  that  we  are  prone  to  look  at 
our  merchandise  as  something  that  must  be 
kept  moving,  and  not  as  cash.-  In  doubtful 
cases,  consider  your  goods  as  cash,  and  decide 
accordingly.  This  will  facilitate  the  process 
of  arriving  at  a  conclusion  very  quickly  in 
most  cases;  for  in  no  case  would  you  willingly, 
probably,  loan  the  parties  the  amount  involved, 
even  though  the  interest  on  the  money  should 
be  equal  to  the  profit  on  the  goods.  Another, 
more  off-hand  but  business-like  method  by  which 
to  determine  doubtful  cases,  is  to  take  the  benefit 
of  the  doubt  ourselves,  and  keep  our  goods  for 
better  and  safer  customers.  Whether  this  is 
the  safest  policy  is  susceptible  of  arithmetical 
demonstration:  Take  four  doubtful  orders,  for 
instance,  of  $1,000  each.  It  is  safe  to  estimate 
that  one  at  least  will  prove  a  loss,  and  in  these 
instances  there  will  be  very  little  salvage.  Does 
it  pay  to  sell  $4,000  worth  of  goods  with  the 
certainty  of  losing  $1,000,  and  the  strong  proba- 
bility that  you  will  lose  even  $2,000?  It  will 


140  WHOM   TO   TRUST. 

surely  be  money  in  your  pocket  not  to  chance 
any  of  the  four. 

There  is  another  dangerous  feature  in  know- 
ingly placing  doubtful  customers  on  our  books. 
They  may  pay  once  or  twice,  and  our  fears  of 
them  are  quieted;  their  orders  are  no  longer 
so  closely  scanned;  we  look  upon  them  as  old 
customers,  and  our  vigilance  is  set  at  rest.  We 
often  say  to  ourselves  of  this  or  that  party: 
Well,  he  is  good  for  this  bill,  and  we  will  risk 
him  for  once  and  then  drop  out,  but  we  do  not 
always  adhere  to  our  good  resolutions.  The 
prudent  business-man  also  takes  into  his  cal- 
culations, in  these  cases,  the  condition  of  the 
country,  and  of  trade.  In  prosperous  times, 
he  is  disposed  to  take  greater  chances,  and 
draw  the  line  less  sharply;  but  as  depression 
sets  in,  either  generally  or  at  local  points,  he 
is  the  first  to  take  alarm,  and  to  reduce  his 
outstandings  to  a  basis  of  safety,  and  when 
the  financial  storm  bursts,  as  it  does  periodi- 
cally, he  has  little  to  fear  from  its  effects. 

Experience  proves  that  in  cases  where  the 
conditions  and  surroundings  of  the  debtor 
appear  in  every  way  favorable  and  satisfac- 
tory, the  losses  are  quite  large  enough  without 
taking  chances  knowingly.  How  much  or  how 
little  risk  we  are  warranted  in  taking  will  nat- 
urally be  governed  by  the  per  cent,  of  profit 
we  •  expect  to  realize  in  a  given  transaction. 
On  a  basis  of  profit  that  would  net  us  as  mer- 


DOUBTFUL   CREDITS.  141 

chants  only  6  per  cent,  per  annum  on  the  capi- 
tal invested,  the  credit  system  of  the  country 
would  be  restricted  to  less  than  one -quarter  of 
its  present  volume.  Mercantile  credits  would 
be  placed  more  nearly  on  a  footing  with  bank 
credits.  To  make  10,  or  12,  or  20  per  cent,  on 
our  capital,  however,  offers  temptation  and 
inducement  to  take  proportionate  risks.  "  The 
larger  the  interest  the  poorer  the  security," 
is  an  old  maxim  well  understood  by  money- 
lenders. 

In  conclusion,  we  may  say  of  all  doubtful 
applicants  for  credit,  that  our  so-called  Num- 
ber One  risks  prove  doubtful  enough,  and 
when  we  think  we  are  perfectly  safe,  we  not 
infrequently  "get  left."  This  being  the  expe- 
rience of  every  business-man,  let  us  confine  our 
credit  transactions  to  those  whom  we  think 
are  safe  and  reliable,  and  let  the  doubtful  cases 
be  served  elsewhere.  As  a  successful  merchant 
and  friend  of  the  writer  says:  "  There  is  plenty 
of  good  trade  to  be  had,  and  I  will  have  that, 
or  none." 


142  WHOM   TO   TRUST. 


JOINT-STOCK  AND  COOPERATIVE 
ASSOCIATIONS. 

In  the  last  fifteen  years  the  legislative  enact- 
ments of  the  different  States  have  been  such  as 
to  favor  joint-stock  companies  for  mercantile, 
manufacturing  and  industrial  pursuits,  and  the 
benefits  arising  from  such  legislation  can  hardly 
be  over-estimated.  The  law  in  most  States 
favors  and  makes  easy  the  organization  of  stock 
companies.  It  enables  inventors,  discoverers, 
and  men  experienced  in  certain  branches,  to 
promote  their  enterprises  by  enlisting  many  to 
contribute  each  a  little  of  their  surplus,  and 
the  investors  or  stockholders  have,  on  the  other 
hand,  the  assurance,  by  legal  enactment,  that 
their  responsibility,  legal  and  moral,  is  limited 
to  the  amount  of  their  paid-up  stock.  To  the 
investor  this  is  all-important.  His  own  legiti- 
mate business  is  not  in  the  least  impaired  or 
jeopardized  by  the  possible  entanglement  or 
liability  that  might  arise  from  a  partnership. 

It  is  this  feature,  the  non-liability  of  the 
individuals  comprising  a  company,  that  we 
have  to  do  with.  Whatever  capital  is  paid 
into  a  company,  or  agreed  to  be  paid  in,  is  all 
that  the  creditor  has  to  look  to,  and  when  this 
is  lost,  there  is  neither  moral  or  legal  responsi- 
bility attaching  to  any  one  of  the  members  of 
the  company.  There  is,  so  to  speak,  no  moral 


JOINT-STOCK   ASSOCIATIONS,  ETC.  143 

status,  no  individual  integrity,  back  of  it.  In 
this  respect,  therefore,  partnerships  differ  from 
corporations,  each  and  all  the  members  of  the 
former  being  personally  liable  for  all  the  debts 
until  they  are  paid  or  liquidated  in  some 
manner. 

We  have  become  accustomed  to  corporations 
where  the  enterprise  has  been  of  a  public  char- 
acter, like  railroads,  banking,  and  financial 
institutions,  and  very  extensive  manufacturing 
establishments,  and  the  existence  of  this  class 
of  enterprises  would  have  been  impossible  if 
the  enormous  capital  required  had  to  be  con- 
tributed by  a  few  persons.  The  whole  country 
—in  fact  every  money  center  in  the  world — is 
interested  in  public  improvements,  and  the  bene- 
fits arising  from  this  aggregation  of  capital, 
all  applied  to  one  purpose,  are  unquestionable. 

But  when,  as  in  late  years,  the  stock-com- 
pany plan  has  found  adoption  by  all  kinds  of 
enterprises,  with  capital  ranging  from  $1,000 
upward,  we  are  constrained  to  inquire  into  the 
purpose  and  motives  of  such  organizations. 
To  organize  a  stock  company  for  carrying  on 
a  small  mercantile  business  with  $2,000  capital, 
more  or  less,  can  hardly  find  justification  on 
the  ground  of  any  advantage  to  business  in 
any  sense.  But  that  the  promoters  or  mana- 
gers have  reasons,  personal  reasons,  generally, 
which  make  such  a  course  desirable  or  neces- 
sary, we  need  never  question.  These  small 


144  WHOM   TO  TRUST. 

" corporate  bodies''  are  usually  " close  corpo- 
rations," and  the  stock,  and  consequently  the 
business,  is  all  under  the  control  of  one  man. 
This  is  about  the  only  redeeming  feature  in 
them,  in  so  far  as  it  gives  the  business  a  man- 
aging head  without  any  interference.  It  will 
be  found  that  the  manager,  or  proprietor  in 
fact,  is  under  a  cloud;  that  prior  business 
embarrassments,  judgments,  and  claims  against 
him,  prevent  his  doing  business  in  his  own 
name,  and  the  stock  company  furnishes  a  way 
for  him  to  carry  on  his  business  without  let  or 
hindrance.  In  these  cases  the  credit-man  has 
only  to  consider  the  character  of  the  manager, 
and  he  will  have  no  difficulty  in  determining 
his  or  his  company's  claim  to  credit. 

There  is  sometimes  a  bona-fide  company,  com- 
prising a  large  number  of  small  stockholders, 
organized  for  carrying  on  a  small  manufactur- 
ing or  mercantile  business,  rarely  mercantile, 
however.  The  promoter  of  these  is  generally 
the  manager,  but,  as  in  larger  organizations,  he 
is  subject  to  the  dictum  of  the  board  of  direct- 
ors. Of  these  it  may  be  said,  that  "  too  many 
cooks  spoil  the  broth."  There  is  no  definite 
policy,  and  there  is  not  enough  individual 
interest,  and  both  are  necessary  to  insure 
success  in  any  business.  Usually,  after  the 
stockholders  have  wrangled  over  the  affairs 
of  the  company  for  about  a  year,  and  the  shoe- 
maker and  the  candlestick-maker  have  had 


JOINT- STOCK  ASSOCIATIONS,  ETC.  145 

their  say  on  the  management  of  a  fancy  grocery 
store,  for  instance,  the  concern  passes  into  other 
hands. 

These  are  entitled  to  credit  to  the  extent  of 
their  bank  balances,  and  no  more.  No  great 
harm  is  done  to  the  business  community  by 
them.  Stock  companies  have  their  advantages 
and  their  disadvantages,  and  the  latter  are  rather 
greater  than  the  former,  in  several  important 
respects.  For  old,  well-known  firms  to  incor- 
porate, has  many  advantages,  and  the  credit  of 
the  house  being  established,  only  matters  of 
convenience  or  of  expediency  need  be  consid- 
ered by  them.  But  in  the  case  of  enterprises 
that  have  still  to  gain  the  confidence  of  the 
community,  the  stock  company  labors  under 
decided  disadvantages  over  the  copartnership 
in  obtaining  credit.  Smith  &  Brown  (copart- 
nership) can  get  a  credit  at  their  bank  for 
$10,000.  The  Smith  &  Brown  Co.,  with  the 
same  capital,  and  doing  the  same  amount  of 
business,  finds  it  difficult  to  obtain  one-half  as 
much  accommodation  in  their  capacity  of  stock 
company.  Go  to  any  bank  and  ask  why  the 
discrimination  is  made,  and  they  will  tell  you 
that  they  prefer  to  deal  with  individuals,  for 
obvious  reasons,  and  the  merchant  or  manu- 
facturer, applied  to  for  credit  by  them,  will 
render  the  same  verdict. 

Credit  is  given  to  individuals,  up  to  the  limit 

of  their  probability  to  pay,  character,  experi- 
10 


146  WHOM  TO   TRUST. 

ence,  and  reputation  for  'honesty  considered. 
Credit  to  stock  companies  is  given  to  the  extent 
of  their  paid-up  capital.  The  former  is  bound 
to  us  during  his  life-time  to  pay  his  obligations; 
the  latter,  in  case  of  failure,  is  "  wiped  out  of 
existence,"  and  with  it  all  the  creditors. 

The  granger  movement,  inaugurated  in  1870, 
or  thereabouts,  affords  a  good  illustration  of 
cooperative  associations  and  their  outcome. 
Thousands  of  these  were  started.  The  grangers 
undertook  to  do  the  business  of  the  country 
and  monopolize  trade  by  associating  themselves 
into  mercantile  companies  and  appointing  or 
electing  men  as  managers.  Too  many  men, 
too  many  minds,  and  the  lack  of  experience 
withal,  brought  them  to  a  halt.  The  old  motto: 
"Shoemaker,  stick  to  your  last,"  conveyed  a 
practical  meaning  to  them  which  they  had 
never  before  realized. 

These  associations  were  cooperative  in  name 
but  not  in  fact.  Like  cooperative  societies  for 
mercantile  or  manufacturing  purposes,  other 
than  so-called  Grangers,  they  lacked  unity  of 
interest,  and  lack  of  eif ort  in  a  given  direction 
and  for  a  specific  purpose.  Every  business, 
small  or  large,  must  have  a  ruling  spirit  at  the 
head  of  it  to  give  its  affairs  intelligent  direction, 
and  this  master-spirit  must  be  in  a  position  to 
be  supreme  ruler.  Everyone  holding  an  inter- 
est can  not  be  "boss,"  and  this  is  apt  to  be 
considered  the  special  prerogative  of  every 


JOINT-STOCK    ASSOCIATIONS,  ETC.  147 

member  of  a  cooperative  company  by  reason 
of  his  supposed  superior  talent. 

The  lack  of  economy  in  stock  companies  is 
also  a  noticeable  and  a  bad  feature,  and  one 
that  operates  especially  against  newly-started 
enterprises.  Our  own  money  is  one  thing;  the 
money  of  a  corporation  in  which  we  have  but 
a  part  interest,  is  quite  another,  with  the  ordi- 
nary man.  That  close  calculation,  attention 
to  details,  and  saving  of  pennies,  so  necessary 
for  new-beginners  in  any  business  venture,  are, 
we  may  say,  rarely  found  in  stock  companies. 
The  average  man,  not  doubting  honesty  or 
ability  at  all,  would  not  make  a  safe  bank  pres- 
ident or  railroad  manager.  There  are  really 
few  men  who  have  the  faculty  of  administering 
other  people1  s  money  as  if  it  was  their  own. 
Of  the  trusted  and  tried  manager  of  a  bank, 
or  other  institution,  in  charge  of  the  public' s 
funds,  it  may  be  said,  that  he  feels  more  con- 
cern for  these  than  he  does  for  his  own.  He 
attaches  an  additional  responsibility  to  his 
guardianship  over  them  which  his  own  belong- 
ings do  not,  or  would  not,  call  for. 

Bad  failures  of  the  stock,  and  especially  of 
the  cooperative,  companies  are  rare.  As  they 
get  but  little  accommodation,  they  do  not 
become  deeply  involved,  as  a  rule. 

With  reference  to  their  claims  to  credit, 
without  an  established  record  they  should  be 
held  closely  to  cash  transactions. 


148  WHOM   TO   TRUST. 


WOMEN  IN  TRADE. 

With  the  constantly-increasing  number  of 
women  in  mercantile  occupations,  engaging  in 
nearly  every  branch  of  trade  and  filling  all  man- 
ner of  offices  and  clerkships,  excepting  those 
where  bodily  toil  is  essential,  we  might  reasona- 
bly infer,  as  a  result  of  the  experience  and  the 
knowledge  of  business  methods  acquired  by 
them,  that  the  number  of  women  in  trade,  on 
their  own  account,  would  be  increasing  steadily 
and  proportionately.  In  looking  over  the  Trade 
Registers,  however,  we  find  this  verified  only 
in  a  small  ratio.  Why  this  is  so,  is  susceptible 
of  explanation;  but  we  are  concerned  here  with 
another  question,  namely,  that  of  credit,  and 
the  claims  of  business- women  to  it  and  to  our 
confidence. 

Through  force  of  circumstances  we  find 
women  carrying  on  nearly  all  lines  of  trade, 
but  those  which  to  her  are  most  congenial,  and 
which  she  takes  to  from  choice  for  a  livelihood, 
are  Millinery,  Dry  Goods,  Bakery  and  Confec- 
tionery, Notions,  Stationery,  and  business  of 
the  kind  in  which  her  own  sex  are  largely  her 
patrons,  and  for  these  branches  she  is  not  only 
well-fitted,  but  they  belong  to  her  by  right  of 
adaptation. 

The  business,  then,  in  which  we  generally 
find  her  engaged,  being  thoroughly  legitimate, 


WOMEN   IN  TRADE.  149 

safe,  and  free  from  any  extra-hazardous  features, 
it  is  next  in  order,  in  considering  her  claim  as 
an  applicant  for  credit,  to  take  an  inventory  of 
her  qualities  of  mind  and  heart  in  their  relation 
to  business — her  characteristics,  in  short — and 
see  how  far  they  are  in  harmony  with  the  prin- 
ciples laid  down  in  the  foregoing  chapters. 

An  analysis  of  woman  is,  fortunately  for  the 
writer,  outside  the  province  of  this  treatise, 
which  requires  the  enumeration  of  her  many 
qualities  only  so  far  as  they  have  any  bearing 
on  her  case  as  a  woman  in  trade. 

First,  we  may  say,  she  is  cautious.  This  is  an 
excellent  quality  for  all  business-people  to 
possess.  She  is  saving  when  she  earns  her  own 
money.  Good  quality  number  two :  In  all  her 
transactions  she  looks  to  absolute  safety,  and 
can  seldom  be  induced  to  take  any  chances  that 
might  imperil  her  business  or  her  future.  She 
is  eager  for  the  dollar,  but  she  is  not  over-am- 
bitious, like  man,  and  her  conservatism  keeps 
her  inside  of  the  danger  line.  She  is  not  over 
sanguine,  and  to  her  a  bird  in  the  hand  is  worth 
a  flock  in  the  bush.  She  is  afraid  of  entangle- 
ments and  business  complications,  and  is  deter- 
mined to  avoid  them.  Men  might  follow  her 
example  with  advantage  in  this  respect.  She 
is  in  mortal  terror  of  lawyers,  as  she  is  of  rats, 
and  she  steers  clear  of  the  meshes  of  the  law  by 
giving  it  no  occasion  for  interference.  In  her 
perceptive  faculties  and  intuitive  knowledge  of 


150  WHOM  TO   TEUST. 

tilings,  especially  where  her  pecuniary  interests 
.are  concerned,  she  stands  admittedly  as  man's 
superior. 

When  we  find  her  in  business  at  all,  she  is 
there  for  the  sole  purpose  of  making  her  living, 
and  she  engages  in  no  hap-hazard  operations 
whereby  she  might  lose  her  foothold.  Loss  of 
her  little  capital  would  be  an  irretrievable  ca- 
lamity, and  she  fully  appreciates  t]ie  hopeless- 
ness of  her  situation  in  case  of  failure.  She  is 
not  devoid  of  ambition,  but  she  does  not  permit 
it  to  lead  her  into  trying  to  out-do  her  neighbors 
or  to  eclipse  the  world.  She  is  simply  content 
to  make  her  living,  and  is  not  half  as  easily 
" gulled"  by  glittering  schemes,  as  are  men. 

She  is  also  a  good  credit  manager,  and  if  you 
can  get  her  to  trust  you  at  all  with  any  of  her 
goods  or  chattels,  you  may  deem  yourself  highly 
honored.  She  does  not  readily  part  with  her 
property  on  a  .promise  to  pay,  as  is  the  case 
with  many  of  our  business-men.  If  she  trusts 
at  all,  she  wants  good  assurance  of  payment,  as 
agreed,  and  nothing  short  of  an  almost  absolute 
certainty  will  assure  her.  It  need  not  be  feared, 
therefore,  that  any  considerable  portion  of  her 
capital  will  be  tied  up  or  lost  in  bad  debts. 

There  is  another  feature  in  favor  of  women  in 
trade.  They  have  no  money- squandering  hab- 
its. They  neither  smoke,  drink,  play  billiards, 
or  do  any  of  the  other  countless  things  for 
which  men  spend,  and  feel  they  are  called  upon 


WOMEN   IN   TRADE.  151 

to  spend,  money,  and  the  savings  from  this 
source,  alone,  will  go  far  toward  supporting  a 
woman  and  keeping  her  business  intact.  In 
fact,  in  a  small  business,  such  as  we  usually 
find  her  engaged  in,  her  chances,  owing  to  her 
economy,  would  seem  to  be  better  than  man's. 

In  the  different  branches  of  trade  carried  on, 
some  stand  higher  in  the  credit-man' s  estima- 
tion than  others.  This  is  owing  both  to  the  na- 
ture of  the  business  and  the  men,  as  a  class, 
engaged  in  them.  Of  the  houses,  the  nature  of 
whose  business  brings  them  in  contact  with 
women,  and  who  depend  largely  on  her  for 
patronage,  it  may  be  said  that  their  losses  from 
bad  debts  through  their  female  customers,  come 
within  the  average  range.  But  this  is  saying 
a  good  deal  in  her  favor  when  we  consider  that 
she  does  business  on  very  meager  capital,  and 
her  creditors  trust  almost  entirely  on  her  own 
recognizance  in  meeting  her  obligations.  We 
might  further  add,  that  the  financial  status  on 
which  women  receive  credit,  would  not  warrant 
us  in  giving  credit  to  men,  whatever  their  busi- 
ness might  be.  That  she  should  be  the  recipi- 
ent of  such  extra  confidence  and  favors,  can 
only  be  accounted  for  on  the  grounds  of  an  es- 
tablished record  she  has  made  for  herself  in  the 
mercantile  world.  We  are  governed  by  obser- 
vation, experience,  and  precedents,  in  the  mat- 
ter of  making  credits,  as  in  all  else. 

In  summing  up,  then,  and  considering  all  her 


152  WHOM  TO   TEUST. 

good  points  and  leading  traits  as  an  applicant 
for  credit,  the  verdict  would  be  in  her  favor, 
and  our  fullest  confidence,  within  the  limits  of 
ordinary  prudence,  would  seem  to  be  justifi- 
able. 


CHATTEL  MORTGAGES  AND  OTHER  LIENS.    153 


CHATTEL  MORTGAGES  AND  OTHER 
LIENS. 

Not  infrequently  we  find,  in  looking  up  the 
standing  of  a  firm,  that  its  stock  of  merchan- 
dise and  personal  property  is  covered  by  chattel 
mortgages,  or  that  some  dealer,  who  is  already 
on  our  books,  gives  a  chattel  mortgage.  Ordi- 
narily that  is  equivalent  to  insolvency,  and 
eventual  failure,  and  credit  is  not  warrantable 
under  such  circumstances,  as  a  rule.  Every 
dollar's  worth  of  your  goods  simply  goes  to 
"  the  other  fellow's  "  security,  and  surely  your 
interest  does  not  lie  in  that  direction. 

The  law  in  regard  to  chattel  mortgages  dif- 
fers materially  in  different  States.  In  some  it 
has  been  decided  that  the  instrument  is  not 
good  on  a  stock  of  merchandise  that  is  con- 
stantly changing  its  identity;  but  even  here, 
possession  is  "nine  points  of  the  law,"  and 
when  the  mortgagee  once  gets  possession  by 
virtue  of  his  mortgage,  it  means  time  and 
expense  on  the  part  of  the  unsecured  creditors 
to  dislodge  him. 

Of  late  years  the  mercantile  agencies  have 
been  very  diligent  in  watching  and  notifying 
their  patrons  of  all  matters  of  record,  so  far 
as  they  concern  people  in  trade,  and  who  are, 
presumably,  buying  on  credit.  It  is,  there- 
fore, almost  equivalent  to  a  confession  of  bank- 


154  WHOM  TO   TRUST. 

ruptcy  for  a  dealer  to  have  a  chattel  mortgage 
recorded  against  him,  inasmuch  as  the  whole 
business  community,  far  and  near,  will  at  once 
be  advised  of  the  fact,  and  cause  every  creditor 
to  become  clamorous  for  an  immediate  settle- 
ment of  his  claim,  and  the  man  who  has 
found  it  necessary  to  chattel-mortgage  his 
stock  is  never  in  condition  to  stand  a 
"run." 

Where  fraud  is  contemplated,  the  chattel 
mortgage  offers  the  readiest  means  for  carrying 
out  the  purpose  without  let  or  hindrance. 

It  is  not  asserted  that  the  unsecured  creditor 
always  loses  his  claim  where  a  chattel  mortgage 
is  on  record.  There  are  extenuating  circum- 
stances, sometimes,  but  these,  as  well  as  the 
parties  themselves,  must  be  thoroughly  known. 
It  must  be  borne  in  mind  that  in  these  cases 
you  are  trusting,  not  alone  to  the  man's  honor, 
but  also  to  the  good- will  and  friendly  feeling 
of  the  mortgagee  toward  his  and  your  debtor. 
All  chattel  mortgages  are  so  drawn  that  the 
mortgagee  can  foreclose  at  any  time,  notwith- 
standing the  instrument  may  be  drawn  payable 
at  a  given  period. 

Not  over  wide-awake  dealers  chattel-mort- 
gage their  property,  sometimes  to  relieve  them 
of  temporary  embarrassment,  without  appre- 
hending the  effect  it  will  have  on  their  credit 
and  the  minds  of  their  creditors.  Many  of 
them  are  probably  not  aware  that  every  item  of 


CHATTEL  MORTGAGES  AND  OTHER  LIENS.    155 

record  is  at  once  reported  to  their  creditors, 
but  such  is  the  fact. 

In  the  case  where  judgments  are  on  record 
against  parties,  no  one  would  deem  it  safe  to 
extend  credit,  and  yet  a  chattel  mortgage  is 
not  only  equal  to  a  confession  of  judgment, 
but  it  makes  a  voluntary  transfer  of  the  prop- 
erty tinder  it,  to  have  and  to  be  held  by  the 
mortgagee  until  certain  conditions  are  complied 
with.  On  the  other  hand,  the  judgment  can 
only  be  satislied  by  execution  and  levy  on 
property  found.  The  chattel  mortgage  is 
already  satisfied,  and  execution  and  levy  are 
unnecessary.  Attention  is  called  to  this  for 
the  reason  that  in  the  minds  of  many,  a  judg- 
ment is  a  more  serious  affair  than  a  chattel 
mortgage,  and  that  their  interests  are  more 
endangered  by  the  former,  which  is  entirely 
erroneous.  This  may  be  said,  however:  While 
the  judgment  creditor  is  constantly  on  the 
watch  for  property  to  satisfy  his  claims,  and 
the  debtor's  business  is  in  constant  jeopardy, 
with  the  holder  of  a  mortgage  amicable 
arrangements  and  terms  have  usually  been 
made  by  which  the  debtor  can  prosecute  his 
business  without  fear  of  molestation,  so  long 
as  the  conditions  of  the  instrument  are  carried 
out. 

To  extend  credit  under  circumstances  so  mani- 
festly hazardous  would  be  akin  to  inviting  a 
loss  and  throwing  away  your  property  of  your 


156  WHOM  TO   TRUST. 

own  free-will  and  accord,  and  this  is  assuredly 
not  your  intent,  as  a  business-man.  Astonish- 
ing as  it  seems,  however,  no  concern  is  ever  so 
unworthy  as  not  to  be  able  to  get  credit  some- 
where. The  least  that  can  be  said  of  houses 
that  cater  to  this  class  of  risks,  is,  that  they 
themselves  are  lacking  in  the  elements  neces- 
sary to  permanent  success. 

The  good,  sound,  conservative  merchant  has 
no  use  for  the  chattel-mortgaged  dealer,  unless 
the  mortgage  runs  to  himself. 


INSURANCE.  157 


INSURANCE. 

No  merchant  should  be  entitled  to  credit 
who  does  not  keep  his  stock  and  other  personal 
property  fully  covered  by  insurance.  In  some 
localities  insurance  is  very  high,  but  where  it 
is  so  the  risk  is  proportionately  great,  and  if 
the  risk  is  extra  hazardous  to  the  insurance 
companies,  why  should  it  not  be  considered 
equally  so  by  the  owner  of  the  property?  Even 
if  the  owner  be  out  of  debt,  and  the  loss,  in 
case  of  fire,  falls  entirely  upon  him,  it  is  still  a 
transgression  of  good  business  principles  not  to 
be  insured. 

The  good  business-man  has  for  his  motto  that 
what  is  worth  possessing  is  worth  insuring,  and 
the  expense  should  be  regarded  in  the  same 
light  as  any  other  current  expense,  such  as 
heat,  light,  etc. 

The  case  before  us  is  that  of  a  merchant  who 
owes  for  a  large  portion  or  for  all  of  his  stock, 
and  in  justice  to  his  creditors  he  should  be  fully 
insured;  in  fact,  be  insured  for  their  benefit 
directly.  It  is  a  safeguard,  and  one  which 
every  creditor  has  a  moral  right  to  exact  of  his 
debtors. 

Railway  corporations  do  not,  as  a  rule, 
insure.  Neither  do  some  of  our  wealthy  real- 
estate  owners.  Their  course,  however,  is  justi- 
fiable from  a  different  stand-point  from  that 


158  WHOM   TO   TRUST. 

which  pertains  to  the  merchant  or  manufact- 
urer. Their  property  is  scattered  over  a  vast 
area,  and  no  single  fire  would  cause  them  any 
considerable  loss.  But  with  the  merchant  it  is 
different.  All  his  stock  in  trade,  representing 
his  capital,  and  often  that  of  others,  is  located 
at  one  point,  and  a  fire  means  financial  ruin,  to 
avert  which  the  prudent  man  is  careful  to  be 
insured,  the  protection  thus  offered  being  more 
than  an  equivalent  for  the  expense  incurred. 

Insurance  statistics  to  the  general  reader  have 
no  particular  significance.  They  deal  with  a 
large  array  of  figures  of  losses  paid  and  risks 
written,  which  convey  no  special  meaning  to 
the  uninitiated. 

To  arrive  at  plain  facts,  we  take  the  statistics 
of  1887,  in  which  year  we  find  the  fire-risks 
written  to  have  been  $10,500,000,000  in  round 
numbers.  The  premiums  received  for  these  risks 
was  $95, 000, 000.  The  losses  paid  were  $52, 000,  - 
000.  This  gives  an  average  of  nine-tenths  of 
1  per  cent,  of  premiums  paid;  that  is,  90 
cents  on  every  $100  worth  of  insurance.  But 
in  arriving  at  this  average,  we  include  farm 
buildings,  improvements,  and  also  Al  building 
risks  in  cities,  which  will  raise  the  percentage 
on  mercantile  and  manufacturing  risks  very 
considerably,  and  it  is  these  that  we  are  con- 
cerned with;  so  that  it  is  safe  to  say  that  one 
merchant  or  manufacturer  out  of  every  three, 
in  the  course  of  his  business  life-time,  suffers 


INSURANCE.  159 

loss  by  fire.  And  when  the  chances  of  such  a 
catastrophe  are  narrowed  down  to  one  in  three, 
not  much  margin  is  allowed.  From  personal 
observation,  and  in  the  absence  of  any  statistics, 
I  will  say,  that  in  the  course  of  thirty  years, 
one  of  every  two  dealers  has  suffered  loss  by 
fire;  and  this  view  finds  corroboration  in  the 
minds  of  many  experienced  men.  Of  course, 
the  risk  is  greater  in  some  branches  of  business 
than  in  others.  Of  the  printing  establishments, 
for  instance,  it  is  safe  to  say  that  their  exemp- 
tion from  fire  does  not  exceed  twenty  years,  so 
that  of  one  hundred  concerns  in  existence  to- 
day, in  twenty  years  not  one  will  have  escaped. 
Many  lines  of  manufacture  are  equally  and 
even  more  hazardous. 

On  a  basis  of  premiums  received  by  insurance 
companies  for  risks  written,  and  judging  also 
from  long  observation  by  parties  in  a  position 
to  know,  we  may  assume,  in  regard  to  the  ordi- 
nary manufacturing  and  mercantile  business, 
that  every  man  engaged  in  these  pursuits  for  a 
life-time  suffers  damage  by  fire  to  a  greater  or 
less  extent  at  some  period;  and  even  in  the 
more  fortunate  cases,  the  total  cost  of  keeping 
always  insured  bears  no  relative  proportion  to 
the  loss. 

Instances  are  not  wanting  where  men  have 
constituted  themselves  into  insurance  compa- 
nies, and  become  their  own  insurers,  on  the 
hypothesis  that  what  they  save  in  premiums 


160  WHOM  TO  TRUST. 

will  cover  an  eventual,  though  never-expected, 
loss.  The  wisdom  of  this  policy  can  not  be 
reconciled  with  the  facts  before  us.  and  it  must 
be  put  down  as  penny  wise  and  pound  foolish, 
and  in  the  long  run,  disastrous. 

From  the  stand-point  of  the  creditor,  it  is 
every  man's  duty  to  insure.  The  moral  obli- 
gation exists,  but  there  should  also  be  a  legal 
obligation.  We  can  not  coerce  our  debtors  to 
insure,  but  we  can  refuse  to  trust  them,  and 
this  will  bring  about  a  voluntary  compliance. 
No  man  is  entitled  to  credit  whose  concern  and 
feeling  of  responsibility  is  lacking  to  such  a 
degree  as  to  willfully  jeopardize  his  creditors' 
safety. 


INFORMATION  PERTAINING  TO  CREDITS.    161 


MISCELLANEOUS   INFORMATION    PER- 
TAINING TO  CREDITS. 

The  merchant  or  salesman  of  large  experi- 
ence will  be  governed  in  making  credits  by 
some  things  quite  insignificant  in  themselves. 

(1)  In  this  day  of  traveling  agents,  no  mer- 
chant need  go  out  of  his  store  from  one  year's 
end  to  the  other  to  buy  goods;  he  can  buy 
all  and  more  than  he  wants,  and  generally 
do  it  better  and  cheaper  from  agents  than  by 
going  into  the  market  himself.  This  does  not 
apply  equally  to  all  lines  of  business,  for  in 
some,  the  matter  of  selection  of  goods  and 
styles  makes  a  personal  visit  imperative.  The 
force  of  this  argument  is  intended  to  show  that 
people  do  not  have  to  go  out  of  their  way  to 
buy,  and  it  is  not  natural  for  them  to  do  so. 
When,  therefore,  an  order  is  received  from  a 
stranger  for  a  staple  line  of  goods  that  can  be 
bought  in  any  jobbing  town,  and  when  that 
order  comes  from  a  locality  not  at  all  tributary 
to  your  city,  but  by  reason  of  transportation 
facilities,  belongs  to  another  town,  the  natural 
and  rightful  inference  is,  that  the  man  has 
exhausted  his  credit  nearer  home,  and  there- 
fore seeks  new  connections.  But  even  did 
geographical  barriers  and  reasons  not  exist,  it 
would  still  be  wise  to  look  with  caution  on 

unsolicited  orders  from  strangers.     Of  course, 
11 


162  WHOM   TO   TRUST. 

we  all  get  more  or  less  mail-order  trade,  and 
this  can  not  be  too  highly  valued.  It  is  an 
indication  of  the  buyer' s  confidence  in  us,  which 
thus  finds  expression  in  his  preference  for  us. 

(2)  There  are  houses  who  do  not  employ 
agents,  and  who  do  a  large  business,  notwith- 
standing. They  are  generally  old,  well-known 
houses,  however.  They  advertise  largely  by 
means  of  prices-current  and  circulars,  and 
undoubtedly  have  inducements  to  offer,  but, 
all  things  being  equal,  it  can  not  be  denied 
that  personal  solicitation  is  the  most  effective, 
and  that,  on  an  even  footing,  personal  suasion 
will  have  the  advantage. 

Preference  in  trade  is  traceable  to  satis- 
factory past  relations,  and  the  result  is  confi- 
dence. On  this  hypothesis,  houses  become 
firmly  established,  as  we  say,  and  command 
trade,  both  through  their  representatives  and 
otherwise.  People  do  not  "switch  off"  from 
one  house  to  another  without  reason,  and  the 
reasons  are  many;  nor  is  the  loss  of  a  customer 
always  to  be  regretted.  But,  accepting  the 
facts  as  we  find  them,  they  prove  that  instead 
of  having  business  thrust  on  us,  we  find  that  a 
continual  scramble  is  necessary  to  get  even  our 
share.  Logically,  then,  when  orders  are  ten- 
dered us  without  special  solicitation  on  our 
part,  and  without  any  claims  on  the  sender, 
by  reason  of  acquaintance  and  previous  busi- 
ness relations,  close  scrutiny  is  always  advisa- 


INFORMATION  PERTAINING  TO  CREDITS.    163 

ble.  We  must,  of  course,  use  judgment  in  the 
matter.  If  you  are  handling  a.  specialty,  which 
you  control,  and  no  one  else  sells,  people  have 
to  patronize  you  with  or  without  solicitation. 

(3)  A  buyer   who  is    not    particular  about 
prices,  though  sure  to  want  the  longest  time, 
is  likewise  a  subject  for  distrust.     In  these 
times  of  active  competition,  no  dealer  can  afford 
to.  be  overstocked  or  pay  too  much  for  his 
goods.        Recklessness  in  buying,  both  as  to 
quantity  and  prices,  does  not  portend  success, 
and,  as  creditors,  we  are  interested  in  every 
customer's  success. 

(4)  We  like  to  deal  with  the  liberal   ' '  live- 
and-let-live "    buyer.      It  is  a  pleasure  to  do 
business  with  him.      This  includes,  also,  the 
man  who  knows  his  business  thoroughly.     He 
knows  what  goods  he  needs  and  can  sell,  and 
he  is  posted  on  their  values,  and  is  willing  to 
give  value  for  them.     He  does  not  haggle;  he 
either  takes  or  leaves  them.     This  represents 
the  better  class  of  merchants.     Not  quite  so 
agreeable  is  the  over-particular,   cranky  indi- 
vidual. 

We  find  engaged  in  trade,  as  in  other  occupa- 
tions, a  liberal  sprinkling  of  so-called  "cranks," 
or  kickers,  but  the  mercantile  representative 
of  this  class  has  the  best  chance  for  unretarded 
growth.  The  business  community  being,  as  a 
rule,  accommodating  and  eager  to  please,  our 
crank  finds  it  easy  to  ply  his  vocation,  and 


164  WHOM   TO   TKUST. 

impose  on  our  good-nature.  He  is  forever 
being  smoothed  over  only  to  find  him  breaking 
out  in  new  spots.  In  his  way,  he  is  a  perfect 
autocrat.  Things  must  be  to  suit  his  notion, 
and  reason  or  logic  he  has  no  use  for. 

Business-houses,  and  their  salesmen  in  par- 
ticular, are  not  long  in  finding  him  out,  and 
after  he  is  once  "stamped  and  labeled,"  we 
know  about  how  to  handle  him,  and  save  our- 
selves much  annoyance.  He  is  labeled  all  the 
way  through,  from  the  office  to  the  shipping- 
room.  Opposite  his  name  on  the  ledger  is 
marked  "crank."  Except  by  special  request 
no  "monthly  statement"  must  be  mailed  to 
him.  The  chances  are  that  he  has  a  special 
grudge  against  statements,  and  we  are  gener- 
ally made  aware  of  this  peculiarity  of  his  after 
the  first  round.  His  orders  we  mark  "crank," 
when  we  send  them  to  the  shippers.  This  is 
done  to  insure  extraordinary  care  in  filling 
them  to  the  letter.  Change  of  quantities  or 
the  ordinary  substitutions  are  not  permissible 
in  his  case.  To  ship  him  quarter  of  a  dozen 
rather  than  break  a  package  for  a  sixth  of  a 
dozen  only,  as  ordered,  or  to  substitute  even  a 
better  article  than  the  one  mentioned,  are  lib- 
erties which  will  cost  you  return  freight 
charges,  and  entitle  you  to  a  liberal  round  of 
abuse  besides.  Even  should  the  label  on  a 
bottle  be  pasted  on  carelessly,  and  be  a  little 
lop-sided  and  out  of  true,  his  watchful  eye  is 


INFORMATION  PERTAINING  TO  CREDITS.    165 

sure  to  detect  the  blemish.  He  seems  to  live 
for  and  to  have  a  special  aptitude  in  the  direc- 
tion of  finding  fault  with  things.  Nor  is  he 
ever  satisfied  to  accept  your  prices  and  terms 
without  considerable  haggling. 

But,  though  he  is  a  disagreeable  customer  to 
deal  with,  the  crank  is  not  without  some 
redeeming  characteristics.  He  seldom  asks 
favors;  he  can  be  depended  on  to  meet  his 
engagements,  and  usually  we  find  him  taking 
advantage  of  all  the  cash  discounts.  He  rarely 
fails  from  any  of  the  ordinary  causes,  and  if  he 
can  be  handled,  and  his  trade  be  made  profita- 
ble to  us,  we  may  feel  secure  in  his  paying  100 
cents  on  the  dollar.  * 

(5)  A  valuable  hint,  worth  knowing,  is  in 
regard  to  the  course  pursued  by  different  peo- 
ple to  obtain  credit.  We  are  frequently  called 
upon  to  write  to  parties,  telling  them  that  the 
information  concerning  their  standing  does  not 
warrant  opening  an  account.  This  we  write 
only  when  we  are  satisfied  that  we  do  not  wish 
to  extend  them  credit.  As  long  as  we  are  in 
doubt  we  do  not  write  in  that  forbidding  strain; 
but  where  this  is  done,  our  letter  will  receive 
treatment  of  various  kinds.  The  man  who  is 
able  and  willing  to  pay  for  what  he  buys,  will 
not  waste  any  words  or  stationery  on  you.  He 
will  simply  buy  his  goods  elsewhere;  nor  need 
you  ever  look  for  any  more  business  from  him. 
The  man  who  is  responsible  need  not  beg  for 


166  WHOM   TO   TRUST. 

goods;  in  fact,  it  is  a  hardship  for  him  to  keep 
from  over-buying  of  the  many  houses  eager  to 
supply  him.  On  the  other  hand,  the  man  who 
answers  your  letter  by  making  explanations 
and  asseverations  of  his  intention  and  ability 
to  pay,  without,  however,  giving  facts  or  fig- 
ures, this  man,  four  times  out  of  five,  makes 
us  regret  a  subsequent  change  of  mind  con- 
cerning him.  No  responsible  man  will  take 
your  refusal  to  trust  him,  with  equanimity;  it  is 
a  thrust  against  his  integrity.  If  he  says  any- 
thing at  all,  and  is  a  polite  man,  he  will  simply 
tell  you  to  keep  your  goods. 

Experience  has  taught  this  lesson,  that  when 
we  find*  men  begging  to  patronize  us,  in  spite 
of  ourselves,  their  credit  is  at  a  low  ebb  in 
other  directions.  No  man  will  allow  himself 
to  be  snubbed  if  he  is  independent  of  us,  and 
the  fact  that  he  does  so,  is  a  priori  evidence  of 
weakness,  morally  and  financially,  particularly 
the  latter. 


OLD   CUSTOMERS.  167 


OLD  CUSTOMERS. 

To  avoid  losses  from  this  source  seems  next 
to  impossible.  We  feel  that  a  customer  who 
has  traded  with  us  for  years,  and  who  has 
always  kept  a  satisfactory  account,  is  entitled 
to  accommodation  of  extra  time,  should  he 
desire  it,  and  we  are  glad,  usually,  not  that  he 
wants  a  little  indulgence,  but  that  we  can  be  of 
service  to  him.  No  doubt  enters  our  minds  as 
to  his  financial  soundness;  we  .accept  as  bona 
fide  the  reason  he  gives  us  for  asking  the  favor, 
and  probably  he  is  thoroughly  honest  in  believ- 
ing that  all  he  needs  is  a  temporary  extension. 
Most  men  never  fully  realize  their  condition 
until  they  are  hopelessly  bankrupt,  and  until 
they  reach  this  point,  and  can  go  no  farther, 
they  live  in  hopes  of  extricating  themselves, 
and  feel  certain  that  they  could  do  so  if  their 
creditors  would  only  extend  their  accommoda- 
tion a  little  longer.  In  many  cases  it  will  be 
found  that  "  dry-rot,"  like  some  insidious  dis- 
ease, has  done  its  slow,  but  very  effective,  work. 

In  the  case  of  our  old,  and  heretofore  prompt 
customer,  quite  unbeknown  to  us  he  has  gradu- 
ally been  running  behind,  and,  instead  of  a  tem- 
porary inability  to  pay,  he  is  practically  insolv- 
ent when  he  asks  for  an  extension.  Some  day  we 
learn  of  his  assignment,  to  our  very  great  sur- 
prise, for  nothing  is  more  remote  from  our 


168  WHOM  TO  TRUST. 

thoughts  than  that  he  should  ever  fail.  We 
console  ourselves,  if  we  are  only  moderately 
interested,  with  the  reflection  that  he  might 
have  been  our  debtor  to  a  much  larger  sum,  if 
he  had  chosen. 

Gradual  growth  and  accumulation  of  capi- 
tal are  indispensably  necessary  to,  and  show 
indications  of,  a  healthy  business.  Some  years 
may  show  less  gain  than  others,  but  a  "  stand- 
still ' '  is  not  a  sign  of  prosperity.  Every  busi- 
ness man  should  be  a  little  better  off  financially 
at  the  end  of  each  year,  and  when  we  find  a 
customer  who  has  to  sacrifice  a .  well-earned 
reputation  for  punctuality  and  good  business 
methods,  which  it  has  taken  him  years  to  estab- 
lish, and  of  which  he  has  just  reason  to  be 
proud,  we  may  infer  that  his  course  is  directed 
by  necessity,  and  that  his  future  is  not  propi- 
tious. Of  this  fact  he  always  gives  us  due 
notice. 

The  only  method  to  pursue  is  to  look  up  the 
standing  of  our  customers  at  least  once  a  year. 
The  man  who  was  in  good  circumstances  a  year 
ago  may  have  lost  money  in  one  way  or  another, 
and  have  become,  possibly,  insolvent  during 
even  this  short  space  of  time.  It  is  not  safe  to 
trust  any  man,  year  in  and  year  out,  without 
' '  looking  him  up ' '  at  stated  intervals.  This  is 
not  meant  to  involve  the  expense  of  a  mercan- 
tile report,  but  simply  the  labor  of  referring  to 
the  rating  in  the  agency  books.  Where  these 


OLD   CUSTOMERS.  169 

have  remained  unchanged,  or  have  not  been 
changed  for  the  worse,  from  one  period  to 
another,  we  need  go  to  no  further  expense; 
but  in  those  cases  where  we  find  ratings  im- 
paired or  suspended,  it  will  be  necessary  to  get 
all  the  new  and  latest  imformation  we  can. 
We  are  often  surprised,  after  a  concern  has 
failed,  to  find  that  it  had  no  rating  for  some 
time  previous.  Had  we  been  governed  by  a 
system  of  periodical  investigation,  we  should 
have  discovered  this  change  in  time,  possibly, 
and  taken  warning. 

Another  group  of  customers  needs  mention 
here,  concerning  which  it  is  difficult  to  govern 
our  conduct  by  any  fixed  rules.  These  are  the 
customers  on  our  books  who  have  never  been 
particularly  prompt.  They  are  afflicted  with  a 
chronic  u  slowness,"  which  never  changes, 
except  for  the  worse,  and  even  improvement  in 
their  financial  condition  does  not  incline  them 
to  change  their  practices.  Whatever  their  cir- 
cumstances may  be,  they  meet  their  obligations 
only  on  the  most  earnest  solicitation;  but  for 
all  that,  they  are  clever  men  to  do  business 
with,  and  are  responsible,  on  an  average.  Mani- 
festly, the  fault  lies  as  much  with  the  too- 
indulgent  creditor  as  with  the  debtor;  for,  if 
need  be,  they  can  usually  be  brought  to  time  by 
a  positive  demand.  Although  there  are  enough 
of  these  "slow  coaches"  to  make  a  large  class, 
we  can  not  treat  them  as  a  body,  but  must 


170  WHOM  TO   TRUST. 

do  so  individually  and  from  a  stand-point  of 
the  known  peculiarities  and  condition  of  each 
individual,  and  our  past  experience  with  him. 

It  might  seem  that  the  losses  incurred  would 
be  greater  from  opening  new  accounts  than 
from  those  already  on  our  books,  but  this  is 
not  so,  with  conservative  houses,  at  least.  We 
rarely  uget  left"  on  a  first  bill.  The  new 
applicant  for  credit  is  "sifted"  thoroughly, 
and  before  an  account  is  opened  with  him,  his 
standing  and  responsibility  must  be  above  sus- 
picion. Not  infrequently  we  feel  justified  in 
selling  a  first  bill  with  the  secret  determination 
to  stop  there;  but,  the  danger  herein  lies  in  the 
fact  that  we  do  not  always  adhere  to  our  good 
resolutions.  Prompt  payment  of  the  first  bill 
leads  to  the  second  and  a  third  credit,  and  so  on, 
until  our  first  impressions  and  fears  are  quite 
forgotten,  or,  at  any  rate,  are  overshadowed  by 
a  few  satisfactory  transactions.  We  are  war- 
ranted, sometimes,  in  the  absence  of  definitely 
satisfactory  knowledge,  in  speculating  on  prob- 
abilities and  taking  our  chances  for  sixty  or 
ninety  days  on  one  bill,  when  we  would  not  be 
willing  or  justified  in  giving  a  "  line  of  credit." 

One  or  two  swallows  do  not  make  summer; 
neither  do  a  few  prompt  payments  entitle  a 
man  to  credit  out  of  proportion  to  his  responsi- 
bility, or  against  unfavorable  surroundings  and 
antecedents,  or  yet  undemonstrated  ability  and 
character. 


LIMIT  OF  CREDIT.  171 


LIMIT  OF  CEEDIT. 

The  limit  of  credit  in  any  given  case  must 
inevitably  be  governed  by  things  outside  the 
actual  capital  invested,  as  much,  or  nearly  so, 
as  by  the  capital  itself.  No  two  cases  could  be 
judged  alike  in  this  respect,  though  the  capital 
might  be  the  same  in  both.  We  should  have 
to  take  into  account  all  the  surroundings  and 
facts,  as  required  by  our  analysis  of  men  and 
things,  and  this  procedure  would  necessarily 
give  us  more  latitude  in  the  one  case  than  in 
the  other,  irrespective  of  pecuniary  resources. 
It  would  seem,  therefore,  that  to  draw  a  line  by 
which  to  govern  our  conduct  in  the  ever-vary- 
ing conditions  which  are  presented  to  the  credit- 
man,  that  the  task  would  be  not  only  an  intri- 
cate one,  but  one  next  to  impossible  of  solution. 

But  all  things  have  a  starting-point,  and  we 
will  commence  by  stating  two  propositions: 

First,  we  know  that  the  man  whose  capital  is 
sufficient  to  enable  him  to  buy  for  cash,  and 
who  owns  all  his  stock,  accounts,  etc.,  free  of 
incumbrance,  is  safe.  We  incur  no  risk  in  sel- 
ling to  him.  The  man  who  owes  nothing,  can't 
fan. 

Second,  we  know  that  the  man  whose  liabili- 
ties are  equal  to  his  assets  is  not  safe,  and  the 
point  is  reached  here  where  the  creditor's 
money  is  in  jeopardy,  although  nominally  rep- 


172  WHOM  TO  TKUST. 

resented  by  property  of  various  kinds.  A  con- 
dition worse  than  tins  need  not  be  entertained, 
even  for  argument' s  sake. 

We  establish,  then,  a  middle-ground  between 
the  two  propositions;  namely,  between  absolute 
safety  and  the  point  where  safety  no  longer 
exists.  The  first  proposition  needs  no  explan- 
ation or  argument,  and  the  credit-man's  task  is 
made  easy.  But  how  far  may  we  with  safety 
diverge  from  the  cash  basis?  That  we  must 
keep  inside  the  limit  of  the  second  proposition 
is  also  unquestioned.  We  have,  to  be  sure, 
assets,  consisting  of  stock,  accounts,  etc. ,  aggre- 
gating in  all  $10,000,  and  we  will  say  that  these 
assets  consist  half  of  merchandise  and  half  of 
accounts  and  bills  receivable.  The  liabilities 
we  will  suppose  to  be  of  equal  amount,  $10,000. 
We  are  here  supposing  by  no  means  an  excep-. 
tional  or  aggravated  case.  There  is  quite  a 
percentage  of  business  carried  on  with  no  better 
status  than  that,  and,  as  in  this  case,  where 
absolutely  no  capital  is  visible.  To  the  experi- 
enced credit-man  the  case  is  a  hopeless  one  for 
both  the  debtor  and  the  creditor,  because  that 
the  business,  sooner  or  later— and  the  sooner 
the  better — must  be  closed  up,  is  inevitable. 
Then,  what  would  be  our  reasonable  expecta- 
tion? ISTo  sane  man  would  expect  the  estate  to 
pay  dollar  for  dollar,  surely.  Even  under  fa- 
vorable circumstances,  and  with  a  good  business- 
man for  assignee  or  receiver,  the  assets  would 


LIMIT  OF  CREDIT.  173 

not  net  the  creditors  over  $6,500,  or  65  per 
cent,  of  their  claims,  and  this  may  be  consid- 
ered a  liberal  estimate  under  an  assignment. 

What,  then,  would  have  to  be  our  limit  of 
credit  to  keep  within  the  bounds  of  safety?  On 
the  supposition,  justified  by  experience,  that 
the  assets  of  a  mercantile  firm,  in  the  event  of 
foreclosure  or  assignee' s  sale,  do  not  bring  over 
65  per  cent.,  the  limit  of  credit,  to  insure*  us 
dollar  for  dollar,  must  be  fixed  at  65  per  cent, 
of  the  inventory  value  of  the  assets.  In  the 
case  we  have  assumed,  $10,000  assets  would  pay 
liabilities  of  $6,500,  and  this  amount  must  be 
established  as  the  limit,  and  in  all  cases  this 
relative  proportion  should  be  maintained.  The 
shrinkage  of  35  per  cent,  represents  the  capital 
invested,  but  creditors  are  paid  in  full,  and  this 
is  as  it  should  be.  The  man  who  embarks  in 
business  is  supposed  to  risk  his  capital,  and  not 
ours,  in  the  enterprise,  and  in  case  of  loss  or 
failure,  we,  as  prudent  business-men,  should 
look  to  it  that  there  is  sufficient  margin  repre- 
sented by  capital  to  provide  for  emergencies. 
The  nature  of  the  assets  needs  to  be  considered, 
of  course,  and  the  probable  shrinkage  estimated 
according  to  their  value  and  convertibility 
when  credits  are  made,  as  will  be  seen  by  refer- 
ence to  chapters  on  Assets. 

A  case  such  as  we  have  cited  above,  where 
the  liabilities  are  equal  to  the  assets,  is  practi- 
cally one  of  hopeless  insolvency,  and  perhaps 


174  WHOM  TO  TRUST. 

not  once  in  a  life-time  do  conditions  of  trade 
change  in  favor  of  the  debtor  so  as  to  save  him. 
The  rapid  increase  in  the  value  of  goods  during 
the  war  placed  many  insolvents  on  their  feet 
again,  but  wars  can  not  conveniently  be  invoked 
for  the  preservation  of  sinking  concerns. 

MERCANTILE   REPORTS   ANALYZED. 
[NO.  1.] 

F.  B.  CEESSON,  Stoves,  Tin-Shop,  and  Cornices, 
Dakota. 

(February  12,  1888.) 

He  was  formerly  clerk  in  this  city,  and  was 
discharged.  He  afterward  associated  himself 
with  one  Sardell,  and  in  May,  1887,  they  began 
business  under  the  style  of  Sardell  &  Cresson,  in 
the  manufacture  of  iron  cornices.  The  business 
was  continued  for  a  short  while,  when  Sardell 
withdrew,  and  Cresson  continued,  under  the 
style  of  City  Galvanized  Iron  Works.  In  May, 
1887,  he  was  said  to  have  no  means,  whatever, 
of  his  own,  and  his  record  as  an  employe  was 
said  to  be  poor.  It  was  said,  his  salary  of  $20  a 
week  was  insufficient  to  maintain  his  tastes;, 
that  his  extravagance  ran  to  women,  and  that 
he  was  in  debt  here  for  such  articles  as  jewelry, 
board,  etc.  He  had  a  small  plant  in  his  busi- 
ness, with  little  or  no  stock,  and  what  capital 
he  had  invested  was  said  to  have  been  borrowed 
from  some  lady  friend.  At  home  he  was  virtu- 
ally unknown  to  the  trade  at  large;  his  pros- 


MERCANTILE   REPORTS  ANALYZED.         175 

pects  were  reported  as  poor,  and  he  had  no 
credit.  At  present  he  is  said  to  be  still  single, 
about  forty  years  of  age,  keeps  a  small  store, 
does  not  credit  much,  has  but  a  small  capital 
and  nothing  above  his  exemptions;  is  regarded 
as  honest  in  his  dealings;  might  pay  a  small  bill. 
To  some  of  the  trade  who  have  asked  him  to 
make  a  statement  of  his  worth,  he  will  only  say 
that  he  has  all  the  backing  needed  to  carry  him 
through;  that  a  party  with  $5,000  stands  be- 
hind him,  but  he  refuses  to  divulge  his  friend's 
name. 

ANALYSIS  AND  REMARKS. 

Under  Character,  Habits,  Ability,  Economy, 
this  case  can  readily  be  disposed  of.  He  has 
no  capital  or  responsibility,  and  lacks  all  the 
elements  necessary  to  insure  success.  His  char- 
acter, habits,  and  associations  are  bad.  He  has 
shown  that  he  has  not  ability  or  application 
enough  to  fill  a  clerkship.  He  has  no  notion  of 
economy.  ISTot  known  by  the  trade  at  home. 
Buys  goods  elsewhere,  and  evidently  is  trusted 
by  some.  If  goods  have  any  value  at  all,  they 
are  worth  more  on  our  shelves  than  on  the 
books,  in  this  case. 

[No.  2.] 

G-.  A.  FRANK  &  Co.,          Northern  Wisconsin. 
Wholesale  Grocers. 

(June  10,  1887.) 

This  firm  commenced  business  here  three 
years  ago,  and  is  composed  of  Gr.  A.  Frank 


176  WHOM   TO   TKUST. 

and  L.  A.  J .  The  former  is  a  married  man, 

about  thirty-five  years  of  age,  who,  we  believe, 
failed  once  some  time  ago,  but  is  spoken  of  in 
favorable  terms.  Just  prior  to  entering  in  this 
business,  was  engaged  in  shipping  fruits  to  towns 
in  this  region,  and  not  understood  to  have  any 

means  of  his  own.  His  partner,  J ,  was  an 

explorer,  and  understood  to  have  a  few  thousand 
dollars.  They  started  out  with  a  stock  of 
about  $3,000,  which  they  claimed  was  all  paid 
for.  They  have  been  doing  a  large  business 
from  the  start,  and  making  some  money,  but 
their  capital  is  rather  inadequate  for  the  trade 
they  do,  although  there  is  no  complaint  regard- 
ing, payments,  and  we  understand  they  confine 
the  bulk  of  their  purchases  to  one  house. 
About  one  year  ago,  a  representative  of  a  house 
called  on  them  and  received  the  following 
statement  of  their  condition: 

Stock,  $10,000;  outstandings,  $6,000;  cash, 
and  in  bank,  $200;  liabilities,  about  $9,000;  on 
open  accounts,  about  $500  past  due,  but  not 
pressing,  and  $1,500  due  the  bank.  J—  -  had 
homestead  worth  about  $800.  Merchandise 
sales  for  first  six  months  of  the  year,  $27,000,  of 
which  a  little  over  one-fourth  was  cash. 

This  statement  was  considered  a  candid  one, 
but  showed  that  they  credit  quite  freely  for  a 
house  with  so  light  active  capital;  but  claimed 
to  scrutinize  closely.  They  are  regarded  strictly 
honest,  and  we  understand  they  are  given  what 


MERCANTILE  REPORTS  ANALYZED.          177 

little  bank  accommodations  they  need.  They 
appear  to  have  credit  for  the  demands  of  their 
business,  but  it  is  probably  reasonable  to  sup- 
pose that  their  account  is  allowed  to  run  along. 
They  do  an  immense  business  for  their  capital, 
which  would  be,  nominally,  $4,000  or  $5,000, 
but  thus  far  seem  to  be  able  to  turn  themselves 
without  any  apparent  inconvenience.  Are  very 
fair  business-men,  steady  and  attentive,  but  it 
is  advisable  to  use  some  caution  in  handling 
the  account,  as  their  business  is  crowding  so 
rapidly  that  they  are  apt  to  overreach  them- 
selves. 
Supplemental  to  this  agency  report,  is  that 

made  by  a  traveling  agent:    F is  a  good 

salesman,  and  a  pusher.  His  partner  is  a  non- 
entity, except  as  to  capital  originally  furnished. 
Doing  too  much  credit  business  for  means;  how- 
ever, in  fair  credit,  and  seem  to  get  all  the  goods 
needed.  Think  them  honest  and  well-inten- 
tioned toward  everybody. 

ANALYSIS   AND   REMARKS. 

That  this  concern  is  being  "carried  "  by  some 
one,  or  several  large  creditors,  is  evident.  If  in 
case  of  any  set-back  or  dull  season  these  should 
become  alarmed,  security  would  be  demanded 
and  probably  be  given,  in  which  event  outside 
creditors  will  find  little  left  to  satisfy  their 
claims.  They  are  undoubtedly  honest  and  pos- 
sibly solvent  to-day,  should  they  wind  up. 
12 


178  WHOM   TO   TRUST. 

The  limit  of  credit  allowable  on  their  reported 
condition  simply,  must  be  very  small.  It  is 
not  likely  that  they  can  continue  the  business 
on  the  present  "broad  gauge"  very  long. 
Volume  of  Business  in  Proportion  to  Capital 
will  aid  us  in  our  decision.  Trying  to  bore  a 
two-inch  hole  with  a  gimlet  is  not  a  successful 
undertaking,  usually,  and  theirs  will  be  an 
exceptional  case  if  they  succeed.  We  are  bet- 
ter off,  most  likely,  to  let  those  continue  to 
supply  them  who  have  done  it  thus  far. 

[No.  3.] 
B.  C.  ALLEN  &  Co.  Jobbing  Town,  Ind. 

Dry  Goods. 
(Full  Report,  dated  October,  1881.) 

A  has  been  in  business  since  1845.  Is  now 
seventy-two  years  old.  After  the  war,  reputed 
worth  $150,000  and  in  Al  credit.  At  this 
juncture  A  bought  out  the  managing  partner 
and  took  his  son,  who  had  just  finished  school, 
into  partnership.  From  this  on,  the  concern 
has  been  going  down,  mainly  from  poor  man- 
agement. The  senior  is  not,  and  never  was,  a 
good  business-man.  At  the  beginning  of  the 
war  A  was  heavily  in  debt,  through  former 
failures,  and  obliged  to  do  business  under 
"cover."  Though  penurious  in  business  ex- 
penditures, family  and  personal  expenses  have 
averaged  for  years  not  less  than  $10,000  annu- 
ally, and  continue  at  about  that  rate.  From 


MERCANTILE   REPORTS   ANALYZED.          179 

1871  to  date,  only  one  or  two  years  have  shown 
any  profits,  largely  owing  to  general  depres- 
sion and  decline,  but  more  largely  to  poor 
management.  They  still  do  a  large  business, 
and  show  $110,000  surplus,  but  are  slow  pay, 
and  collections  occasionally  put  into  lawyer's 
hands.  They  are  not  in  Al  credit,  but  seem  to 
get  all  the  goods  they  need.  Homestead  mort- 
gaged for  $9,000,  in  1880,  to  satisfy  claim  for 
borrowed  money.  Wife  said  to  own  some  val- 
uable real  estate.  Assets  represented  to  consist 
of:  Stock,  $135,000;  accounts  and  bills  receiv- 
able, $95,000;  equity  in  improvements  on  leased 
ground,  $8,000;  lands  in  various  parts,  repre- 
sented at  $9,000;  interest  in  business  carried  on 
by  another  son,  $18,000;  total  assets,  $270,000. 
Liabilities:  On  open  account,  $93,000;  due 
bank,  $22,000;  due  for  notes  and  acceptances 
(bills  payable),  $45,000.  No  instruments  on 
record  against  them  as  a  firm.  A  is  said  never 
to  have  applied  himself  closely  to  business, 
paying  more  attention  to  outside  affairs.  The 
son  devotes  much  of  his  time  to  society  mat- 
ters. Business  managed  by  employes. 

ANALYSIS   AND   REMARKS. 

This  report  was  the  result  of  a  special  inves- 
tigation made  by  a  representative  of  an  Eastern 
house.  A  large  line  of  credit  being  involved 
in  negotiations  then  pending,  a  thorough  exam- 
ination of  the  affairs  of  A.  &  Co.  seemed 


180  WHOM  TO   TRUST. 

necessary,  particularly  since  the  prevailing 
impression  among  the  trade  did  not  favor  them. 
On  receipt  of  the  report,  negotiations  were 
dropped,  and  in  the  light  of  subsequent  events, 
the  Eastern  house  certainly  showed  both  wis- 
dom and  conservatism  in  its  decision.  In  1883, 
the  assignee  of  A.  &  Co.  made  the  following  sum- 
marized statement: 

ASSETS. 

Nominal  value  of  stock $  95,000 

Nominal  value  of  accounts  and  bills  receivable 80,000 

Nominal  value  of  outside  interests 20,000 

$195,000 

Appraised  market  value  of  stock $  55,000 

Collectible  accounts  and  bills  receivable 45,000 

Available  outside  interests,  about 5,000 — 

$105,000 

LIABILITIES. 

Secured  to  bank  and  others $  30,000 

Unsecured  claims 95,000 

There  was  realized  $78,000.  The  dividend  to 
unsecured  creditors  was  37  per  cent. 

Two  years  before  the  failure  a  surplus  of 
$110,000  wa,s  claimed.  How  is  this  shrinkage 
accounted  for?  Lack  of  ability,  economy,  and 
personal  application  to  business,  were  the 
causes  of  this  concern's  downfall.  The  item  of 
personal  expenses  alone,  in  the  face  of  a  series 
of  unprofitable  years,  would  cause  a  serious 
drain  on  the  capital.  The  difference  between 
the  nominal  and  actual  value  of  the  assets 
shows  great  incompetency.  It  was  found  that 
goods,  regardless  of  present  value,  were  always 


MERCANTILE  HEPORTS   ANALYZED.          181 

inventoried  at  cost,  and  that  there  was  a  large 
accumulation  of  old  stock  (see  Inventory  Valu- 
ations}. Bad  accounts  and  bills  receivable  were 
likewise  kept  on  the  books,  instead  of  being 
charged  up  to  profit  and  loss  at  the  close  of  each 
year.  The  actual  condition  of  affairs  was  more 
of  a  surprise  to  A.  &  Co.  than  it  was  to  outsiders. 

[No.  4.] 

SMITH  MERCANTILE  Co.,  Lumber  and  Mining 
Region,  Wisconsin. 

(October  12,  1887.) 

Mr.  P.  Q.  Smith,  treasurer  and  manager,  says 
the  company  was  incorporated  June  last,  with 
an  authorized  capital  of  $10,000,  all  paid  in. 
Represented  by  merchandise.  He  says  the 
business  per  month  would  aggregate  $18,000; 
have  $5,000  insurance  on  stock,  and  succeeds 
P.  Q.  Smith.  Expects  to  carry  about  $20,000 
stock  through  the  winter.  Confine  purchases 
to  about  five  large  houses.  Keeps  bank  account 
with  the  First  National  Bank  of  Chicago  and 
local  bank.  On  July  26,  1887,  they  gave  state- 
ment as  follows: 

ASSETS. 

Cash  value  of  stock  in  store $  9,000 

Stock  in  transit 500 

Book  accounts— good 800 

Cash  on  hand  and  in  bank 600 

Real  estate 2,000 

Total  assets $12,900 

LIABILITIES. 

Merchandise,  open  account,  not  due $      500 

Surplus  in  business $12,400 


182  WHOM   TO   TRUST. 

Smith  says,  further,  that  he  considers  his  in- 
terest, outside  of  the  company,  worth  $50,000, 
over  all  liabilities. 

The  company's  books  show  he  paid  out,  in 
about  one  month  in  August  and  September, 
$5,000  in  checks  on  two  banks,  leaving  but  a 
very  small  balance  at  present  time.  He  claims 
to  have  about  $10,000  now,  gives  liabilities  of 
about  $2,000,  and  says  outstandings  are  about 
the  same.  Many  claims  have  been  received 
against  Smith  individually,  and  some  are  in 
attorneys1  hands,  unpaid,  with  which  nothing 
can  apparently  be  done  but  to  await  his  pleas- 
ure, and  it  is  said  that  when  he  has  the  money 
he  dislikes  to  pay  a  debt  with  it.  The  idea 
seems  to  be  entertained  that  the  fact  of  incor- 
poration was  for  the  purpose  of  limiting  his 
liabilities,  and  to  block  the  collection  of  exist- 
ing debts. 

ANALYSIS  AND    REMARKS. 

Under  Stock  Companies  and  Cooperative 
Associations  we  will  find  all  that  governs  this 
case.  Smith  formed  this  company  as  a  means 
to  do  business,  and  to  defraud  his  creditors. 
Statement  of  assets  and  liabilities  and  surplus 
would  make  a  very  good  showing  in  an  honest 
man's  hands.  The  sum  of  the  liabilities  is  out 
of  proportion  to  the  monthly  sales  claimed.  In 
that  locality  the  proportion  of  cash  sales  is  very 
small.  Eight  hundred  dollars  accounts  and 


MERCANTILE   REPORTS   ANALYZED.          183 

bills  receivable  is  also  a  misstatement,  because 
they  are  known  not  to  do  a  cash  business.  The 
goods  probably  go  largely  into  his  own  mines, 
and  these,  it  would  appear,  are  not  within  reach 
of  Smith's  old  creditors,  nor  would  they  be  to 
those  of  his  company. 

Altogether,  the  concern  is  not  worthy  of 
credit;  still  it  is  known  that  they  buy  largely 
from  two  firms,  but  these  probably  have  an 
"  inside  track."  Those  who  can  not  get  on  the 
"inside"  had  better  stay  out  altogether. 


[No.  5.] 
METER  &  THOMPSON,  Michigan. 

General  Store  and  Manufacturers  Furniture. 

(December  1,  1887.) 

Firm  is  composed  of  N.  0.  Meyer  and  U.  Y. 
Thompson.  Ages  thirty- two  and  forty,  and  both 
married;  and  they  have  been  in  business  for  a 
number  of  years,  and  our  report  of  July,  1886, 
which  was  the  time  of  their  last  statement,  is  as 
follows : 

"  Mr.  Meyer  makes  the  following  statement 
of  assets  and  liabilities  :  Stock  in  store,  $13,000; 
factory  stock,  $8,000  ;  machinery  and  dry-kiln, 
$7,000;  warehouse  and  store-building,  $5,500; 
factory  building,  $4,000;  ground,  $8,000;  store 
and  lots,  $800  ;  outstandings,  $6,000.  Total, 
$52, 300.  Liabilities,  for  merchandise,  $9, 000  on 
current  bills.  For  purpose  of  discounting  bills 


184  WHOM  TO  TKUST. 

the  firm  executed  a  mortgage  on  the  ground,  on 
which  all  the  mill  property  and  store -buildings 
stand,  and  including  stock  in  store,  for  advances 
to  the  amount  of  $10,000,  which  the  First 
National  Bank,  the  mortgagee,  agrees  to  carry 
for  five  years.  Advances  at  this  time,  about 
$8,000.  The  realty  was  already  subject  to  a 
mortgage  of  $7,000,  making  total  liabilities  of 
$21, 500.  Surplus,  $31,517. 46.  Mr.  "  H. "  says 
he  regards  the  firm  worth  $25,000  to  $28,000. 
Discount  part  of  their  bills.  Mr.  Meyer  thinks 
by  reducing  stock  and  collection  of  outstand- 
ings  he  hopes  to  reduce  indebtedness  to  bank 
to  $4,000  or  $5,000,  soon,  and  then  try  to  get 
stock  in  store  released,  and,  if  necessary,  give 
new  one  on  property  not  now  subject  to  mort- 
gages. He  states  amount  of  advances  from 
memory.  Learn  at  bank  that  it  exceeds  $8, 000, 
but  not  stated  how  much;  is  still  less  than 
$10,000.  Their  property  is  valuable,  owned 
chiefly  by  Meyer,  and  they  have  a  good  clear 
margin  over  incumbrances,  exemptions,  and 
liabilities,  of  several  thousand  dollars,  and  it  is 
believed  will  work  out.  Meyer  is  regarded  as 
honest.  His  wife  owns  a  homestead. ' ' 

According  to  a  report  of  June,  1887,  they  de- 
cline at  this  time  to  make  a  statement.  They 
produced  an  inventory,  however,  which  showed 
a  net  balance  of  $34,000.  They  owe  $6,000 
on  building,  on  long  time,  and  current 
liabilities  were  $15,000  in  January.  They 


MERCANTILE   REPORTS   ANALYZED.          185 

say  now  their  liabilities  are  considerably 
less,  but  their  stock  is  correspondingly  lighter. 
Under  our  latest  date  it  is  stated  that  (under- 
stand the  mortgage  now  stands  as  $7,000,  but 
the  actual  indebtedness  which  it  is  intended  to 
secure,  doubtless  varies,  from  time  to  time)  the 
real  estate  is  mortgaged,  as  heretofore  reported, 
but  they  have  a  large  margin  over  incumbrances 
and  other  debts.  Their  stock  would  probably 
reach  $20,000,  or  may  go  to  $25,000.  They  pay 
all  their  debts  promptly,  do  a  large  business,  and 
make  money,  and  do  not  seem  troubled  in  get- 
ting all  the  accommodations  wanted. 

ANALYSIS   AND   REMARKS. 

Personal  Property r,  Gliattel  Mortgages,  Heal 
Estate.  Under  these  heads  we  find  the  key  to 
the  solution  of  this  case.  While  we  are  obliged 
for  the  opinion  hazarded  by  the  agency  reporter, 
it  is  the  facts  he  gives  that  are  of  the  most  im- 
portance to  us.  The  concern  stands  well,  but 
they  have  been  very  slow  in  meeting  small  bills, 
and  large  ones  can  hardly  fare  better.  There  is 
no  danger  of  their  failing  as  long  as  the  bank  is 
friendly  toward  them.  Unsecured  creditors  to 
any  considerable  amount  could  not  enforce  col- 
lection, as  the  mortgagees  would  come  in  with 
their  prior  securities,  and  this  operates  as  a 
protection  to  mortgagee  and  mortgagor  as  well. 
The  personal  property,  consisting  largely  of 


186  WHOM  TO   TKUST. 

machinery  and  manufacturing  plant,  represents 
only  nominal  value  to  us.  The  chattel  mort- 
gage of  $10,000  would  fully  cover  stock,  ma- 
chinery, etc.,  currently  valued  at  $25,000.  Real 
estate  is  not  available,  whatever  the  equities  in 
it  might  represent  on  paper. 

They  are  good  for  small  lines  of  credit,  and  the 
amount  would  have  to  be  determined  by  the 
profit,  and  whether  a  house  was  willing  and  able 
to  carry  them.  On  staple  goods  to  the  amount 
of  $1,000  we  should  have  better  assurance  of 
prompt  payment  than  this  report  vouchsafes. 

They  are  too  well  established  and  doing  too 
good  a  business  to  fear  any  trouble  except  from 
extraordinary  causes,  and  a  claim  less  than 
$1,000  could  be  collected,  or  secured,  probably, 
before  they  would  allow  enforcement  of  collec- 
tion bylaw;  but  in  the  face  of  this  favorable 
feature,  even,  they  are  not  a  desirable  risk. 

[No.  6.] 

Gr.  H.  IVES,  AGT.,  Iowa. 

Groceries,  etc. 

(June  9,  1886.) 

He  has  been  in  business  here  since  March, 
1882,  as  agent  for  his  wife.  Came  here  from 
Indiana,  where  he  was  of  the  firm  of  Ives  &  Co. 
Was  not  very  well  regarded  there,  and  was  not 
worth,  when  he  left,  much  over  $1,000,  which 
belonged  mostly  to  his  wife.  He  wrote  us  in 


MERCANTILE   REPORTS   ANALYZED.          187 

February  last  as  follows:  "  I  have  been  here 
for  four  years;  have  done  a  good,  prosperous 
business,  and  am  making  money.  I  had  some 
trouble  last  winter  regarding  the  payment  of 
my  bills,  but  it  all  wore  off  in  a  short  time,  and 
now  somebody  is  trying  to  make  me  trouble 
again.  A  few  years  ago  I  failed  in  business 
through  a  bad  partner,  and  lost  all  that  I  had. 
Since  that  time,  however,  I  have  paid  over 
$3,0l>0  of  those  debts,  but  they  are  not  all  paid 
yet.  The  money  that  I  have  in  business  is 
money  that  my  wife  got  from  home,  and  it 
rightfully  belongs  to  her,  and  that  is  why  I 
have  agent  attached  to  my  name.  I  have  about 
$3,000  in  my  business  over  my  liabilities,  and 
about  $500  of  my  bills  due;  no  chattel  mort- 
gage on  my  stock.  Doing  a  good  business, 
though  always  slow  in  winter,  and  money  hard 
to  collect." 

As  he  states,  all  his  property  is  in  his  wife's 
name,  and  he  does  all  his  business  as  agent. 
He  carries  a  nice  stock  of  groceries,  does  a 
good,  careful  business,  and  attends  to  it  closely. 
It  is  difficult  to  estimate  his  total  clear  worth, 
but  he  is  generally  thought  to  be  worth  in  the 
neighborhood  of  $3,000,  clear.  He  is  worth  lit- 
tle or  nothing  in  his  own  name,  always  hard  up 
and  slow,  and  not  considered  reliable  for  credit. 
From  Indiana  we  learn  that  his  transactions 
there  were  questionable,  and  is  not  regarded  as 
strictly  honest. 


188  WHOM  TO  TRUST. 

ANALYSIS   AND   REMARKS. 

We  shall  be  able  to  dispose  of  this  case  under 
the  head  of  Doing  Business  as  Agents,  also 
Antecedents  and  Honesty. 

We  could  not  safely  sell  him  in  his  own 
name  if  we  had  to  trust  to  his  honesty,  and  in 
his  capacity  as  agent  we  are  at  his  mercy  just 
the  same,  except  so  far  as  his  wife's  actual 
responsibility  ma^  afford  protection.  It  will 
be  found,  probably,  that  should  it  be  under- 
taken to  collect  a  claim  of  any  magnitude,  the 
wife's  property  would  not  be  get-at-able.  He 
has  shown  by  his  statement  that  he  does  not 
mean  to  have  his  wife' s  property  used  to  make 
good  business  losses,  or  for  the  benefit  of 
creditors. 

Accepting  that  the  statement  made  in  regard 
to  the  capital  be  true,  and  also  considering  that 
he  is  doing  a  fair  business,  we  might  place  the 
total  limit,  of  his  credit  at  $1,000.  He  would 
have  to  resort  to  open  fraud,  almost,  to  evade 
payment  of  that  sum.  Nearly  every  concern 
would  risk  this  man  for  a  small  bill,  say  $50  to 
$100,  and  no  doubt  if  the  sum-total  of  his  lia- 
bilities could  be  kept  within  the  proper  limits, 
there  would  be  no  danger.  But  in  the  same 
manner  that  one  concern  is  willing  to  risk  a 
small  amount,  others  are  willing,  and  an  indebt- 
edness of  several  thousand  can  be  run  up.  This 
view  of  the  case  would  not  warrant  any  credit 
at  all  from  a  conservative  stand-point. 


MERCANTILE  REPORTS   ANALYZED.          189 

[No.  7.] 
N.  0.  PLATT,  Town  of  3,000  inhabitants  in  Iowa. 

Hardware  and  Tin- Shop. 
Just  starting  in.  Is  a  young  man,  twenty-six 
years  of  age;  married.  Clerked  for  the  last  six 
years  for  J.  &  J.,  in  this  town.  Good  character 
and  steady  habits.  Well  liked;  regarded  honest 
and  reliable.  Intends  to  carry  stock  of  about 
$2,000.  Claims  to  have  saved  $900  out  of  his 
salary,  and  this  is  corroborated  by  former 
employer.  A  stove  house  and  a  hardware 
house,  he  says,  have  offered  to  carry  him  for 
from  $1,200  to  $1,500.  Prospects  deemed  fair. 
Not*  a  practical  tinner,  but  understands  that 
branch  well  enough  to  run  it.  Wife  is  daugh- 
ter of  well-to-do  farmer  in  the  country. 

ANALYSIS    AND    REMARKS. 

All  the  requisites  to  a  successful  career  are 
furnished  here.  The  fact  that  two  large  houses 
are  willing  to  give  him  a  line  of  credit,  as 
stated,  is  an  indication  that  they  think  well  of 
him  from  a  personal  stand-point.  For  any  ordi- 
nary credit  in  keeping  with  his  business,  he  is 
a  good  risk.  Although  his  capital  is  small,  he 
stakes  all  he  has  and  enough  to  make  him  care- 
ful in  his  management.  See  Capital. 

Having  never  managed  business  for  himself, 
the  creditor  takes  some  risk  in  the  direction  of 
what  his  development  may  be.  A  man  may 
possess  excellent  qualities  of  mind  and  heart 


190  WHOM   TO   TRUST. 

as  clerk,  or  under  someone  else,  and  yet  not  be 
able  to  make  a  success  of  his  own  business.  In 
fact,  cases  of  this  kind  are  not  rare.  For  men 
to  be  their  own  ' '  bosses  "  is  sometimes  a  dearly- 
bought  privilege.  Other  conditions  being  fa- 
vorable, however,  we  are  justified  in  taking 
chances  on  this  one  element  of  doubt. 

[No.  8.] 

B.  C.  DAVIS.  Town  of  10,000,  Ohio. 

Furniture,-  Notions,  Cigars,  etc. 

(May,  1888.) 

Just  starting  in  business,  and  a  stranger  here. 
He  makes  the  following  statement:  c  l  Have  been 
in  the  sewing-machine  business  for  the  past  ten 
years  and  made  some  money,  which  I  invested 
in  real  estate  in  the  town  I  came  from.  Prop- 
erty consists  of  store-building  and  lot,  worth 
$10,000.  Mortgaged  for  $2,500.  I  am  going 
to  sell  this  property  as  soon  as  I  can  and  use 
the  money  in  the  business.  Have  no  other 
property  except  household  goods.  I  intend 
carrying  a  stock  of  $1,500." 

Was  formerly  located  at  M ,  and  under 

date  of  June  8,  1888,  it  was  learned  that  he 
owns  a  store-building,  but  not  worth  nearly 
what  he  claims.  His  business  was  selling 
machines,  and  these  were  sold  to  him  on  com- 
mission. Not  known  to  have  any  responsibility 
beyond  his  equity  in  real  estate.  Nothing 
known  of  his  character  in  particular. 


MERCANTILE  REPORTS   ANALYZED.          191 
ANALYSIS  AND   REMARKS. 

The  only  thing  we  have  here  to  base  credit  on 
is  a  possible  equity  in  Real  Estate.  We  may 
dismiss  this  case  off-hand.  Let  him  first  sell 
his  property  and  be  able  to  show  a  basis 
for  credit.  As  the  matter  stands  now,  he 
has  neither  capital  nor  experience,  and  of  his 
ability  and  character,  no  estimate  can  be 
formed. 

[No.  9.] 

V.  W.  YOUNG.  General  Store. 

Town  of  2,000  inhabitants,  Illinois. 

Commenced  business  recently.  Age  twenty- 
two;  single.  For  several  years  brakeman  on  rail- 
road. Previous  to  that  he  was  in  a  store  for  a 
short  time.  He  has  no  means  of  his  own  to  speak 
of.  Mrs.  Y.  is  quite  well-off,  and  the  capital 
comes  from  this  source.  Calculates  to  carry 
small  stock,  from  $1,500  to  $1,800.  He  states 
that  his  mother  will  put  in  $2,000  for  him  as 
fast  as  the  business  warrants  it.  Is  a  sober, 
industrious  boy,  attentive  to  business,  and 
family  well  regarded.  His  purchases  so  far 
amount  to  $1,200.  Paid  cash  $800,  balance 
bought  on  credit. 

ANALYSIS   AND   REMARKS. 

This  is  one  of  those  cases  which  we  find 
under  Capital;  also,  Experience,  Business  Edu- 
cation, Character,  and  Habits,  Age,  Ability, 
Competition,  etc.  In  fact,  the  risk  is  equally 


192  WHOM   TO   TRUST. 

great  in  every  direction.  There  is  absolutely 
nothing  to  recommend  him  for  credit.  His 
character  and  ability  are  undeveloped;  experi- 
ence, he  has  none.  His  application  and  devo- 
tion to  business,  for  one  of  his  age,  is  no  guar- 
antee of  success,  as  a  rule.  So  far  as  capital  is 
concerned,  the  mother  will  advance  it  probably 
as  long  as  she  sees  the  business  is  prosperous. 
If  not  a  success  and  there  is  danger  of  failure, 
she  will  step  in  as  a  preferred  creditor  in  some 
way  for  the  money  advanced.  The  only  way 
to  sell  him,  if  he  wants  credit,  is  on  his  mother' s 
personal  guarantee  of  payment,  until  such  time 
as  he  shall  be  able  to  show  his  capacity  as  a 
manager  and  business-man,  and  also  show 
evidence  of  establishing  himself  on  a  good 
footing. 

[No.  10.] 

A.  VAN  SLOW.  Iowa. 

Grocer. 

(September,  1888.) 

Mr.  Van  Slow  states  in  November,  1887,  that 
he  is  also  of  the  firm  of  A.  Yan  Slow  &  Son,  at 
W—  — ,  where  he  has  $4,000  invested,  and  says 
that  his  stock  here  is  worth  $5,000,  and  that  he 
has  $6,000  in  good  book  accounts;  also  says  his 
dwelling  is  in  his  wife's  name,  and  that  he 
owns  a  house  and  lot  here  worth  $900,  and  has 
lands  in  Michigan  worth  $5,000,  and  says  that 
$1,500  will  cover  all  he  owes.  Some  good  local 


MERCANTILE   REPORTS   ANALYZED.          193 

authorities  think  the  foregoing  statement  is 
substantially  correct;  speak  well  of  Mr.  Van 
Slow  personally,  and  look  upon  him  as  a  good 
business-man.  Others  say,  however,  that  he 
has  failed  once  or  twice,  and  intimate  that  he 
has  been  assisted  by  bank  here,  and  were  also 
under  the  vague  impression  that  he  is  responsi- 
ble to  the  bank  for  a  portion  of  what  he  has; 
for  this,  however,  we  are  unable  to  find  any 
reliable  authorities,  and  from  the  best  informa- 
tion obtainable,  find  that  aside  from  being  a 
little  loose  in  business  matters  and  somewhat 
inclined  to  spread  out,  that  Mr.  Van  Slow  is  a 
fair  manager.  Good  local  authorities  think 
him  worth  from  $7,000  to  $8,000,  clear,  and  tell 
us  that  he  has  credit  about  home  for  his  busi- 
ness wants,  and  that  no  complaints  are  made 
in  relation  to  the  manner  of  his  payments.  In 
a  report  of  March,  1888,  it  is  stated  that  he  is 
doing  about  as  usual.  Think  trade  is  pretty 
dull,  and  that  he  is  indebted  $4,000  or  $5,000, 
but  regarded  perfectly  good  still.  According 
to  our  latest  reports,  he  has  been  running  along 
about  the  same  for  the  past  year,  and  rather 
hard  up;  however,  he  is  doing  a  good  business 
and  can  learn  of  no  collections  against  him  this 
summer.  He  has  been  refused  credit  in  some 
quarters,  we  learn,  on  account  of  slow  pay- 
ments, but  others  are  willing  to  put  up  with  his 
methods,  so  that  he  has  no  difficulty  in  getting 
all  the  goods  he  needs. 

13 


194  WHOM   TO   TRUST. 

ANALYSIS   AND   KEMAKKS. 

Every  wholesale  house  in  his  line  of  busi- 
ness knows  Mr.  Van  Slow  and  his  methods. 
His  reputation  is  fully  established  as  being  a 
slow  customer.  He  is  undoubtedly  good  for 
what  he  owes,  or  may  owe  in  the  future.  Those 
who  sell  him  will  keep  him  within  proper  lim- 
its, so  that  his  indebtedness  will  be  kept  inside 
the  "danger  line."  Though  considered  good, 
his  credit  is  not  unlimited  by  even  those  with 
whom  he  deals. 

Punctuality  and  Old  Customers  will  cover 
his  case.  If  we  are  blessed  with  a  good  stock 
of  patience  and  can  afford  to  give  six  months, 
on  thirty  or  sixty-day  goods,  this  man  will  do 
to  sell  to,  and  his  patronage  can  be  relied 
on  as  long,  and  to  the  extent  that  it  may  be 
desirable.  He  is  not  hard  to  please,  is  not  a 
close  buyer,  and  if  the  goods  he  buys  afford 
profit  enough  to  pay  for  time  and  collection 
charges,  possibly  we  may  sell  him;  but  we 
must  not  get  too  many  of  his  kind  on  our 
books. 

So  far  as  eventual  payment  is  concerned,  that 
can  be  enforced;  but,  even  the  law  can  not 
secure  our  money  for  us  promptly.  He  will 
generally  take  advantage  of  the  law's  delay, 
which  is  from  thirty  to  sixty  days,  and  he  can 
also  take  the  benefit  of  the  "stay -law,"  which 
gives  him  four  months,  additional  time,  and  in 
some  States  twelve  months.  This  compels  him 


MERCANTILE   REPORTS  ANALYZED.          195 

to  secure  the  debt,  but  does  not  give  us  the  use 
of  the  capital  tied  up. 

In  giving  this  man  credit,  it  must  be  borne  in 
mind  that  his  account  can  not  be  "banked" 
on.  If  many  such  would  be  ruinous  to  the 
creditor,  as  will  be  conceded,  it  follows  that 
even  one  of  the  class  can  not  be  of  benefit,  and, 
consequently  we  are  better  off  without  the 

"  Van  Slows." 

[No.  11.] 

ADAMS,  BROWN  &  Co.,  Colorado. 

Hardware  and  Implements. 

(May  12,  1888.) 

The  firm  is  composed  of  C.  B.  Adams,  C.  B. 
Brown,  and  D.  E.  Clark.  The  business  has 
been  established  some  four  or  five  years,  form- 
erly as  A.  &  B. ,  later  on,  in  1885,  changing  to 
A.,  B.  &  Co.,  with  A.  E.  Davis  comprising  the 
company.  In  February,  1888,  we  have  A.  and  B. 
alone,  who,  in  April,  admitted  Clark,  and  the 
style  again  changing  as  formerly.  They  are 
all  married  men,  aged  thirty,  forty,  and  forty- 
five.  They  have  maintained  a  very  good  credit 
formerly,  but  in  the  middle  of  1887,  they  were 
financially  embarrassed.  In  October,  1887, 
they  write  as  follows,  to  our  request  for  a  state- 
ment :  "  We  have  been  hard  up  on  account  of 
slow  collections,  and  in  one  or  two  places  have 
allowed  drafts  to  be  returned,  and  have  written 
to  the  parties  to  explain  matters.  There  is  no 
cause  for  alarm,  and  parties  that  we  have  asked 


196  WHOM   TO   TRUST. 

for  extensions  have  readily  granted  the  favor," 
and  they  expected  to  have  better  collections, 
and  plenty  to  pay  their  debts.  In  February, 
A.  was  reported  to  have  homestead  property 
worth  $7,000,  and  B.  had  homestead  and  lot, 
valued  at  $1,500,  and  also  other  property,  con- 
sisting of  one  farm  of  160  acres  of  land,  also 
having  invested  in  the  business  $25,000.  Also, 
were  carrying  an  average  stock  of  $22,000. 
At  this  time  they  appeared  in  better  financial 
state,  and  no  complaints  were  heard  regarding 
payments;  also,  keeping  a  bank  account  with 
three  different  banks.  Under  date  of  April  8, 
1888,  A.  &  B.  write:  "  That  they  have  recently 
admitted  Clark  to  copartnership,  which  expires 
five  years  from  date,  and  at  this  time  claim  a 
net  capital  in  the  business  of  $25,000."  We 
learn  that  Clark  is  a  man  of  good  character 
and.  habits,  and  is  reported  to  have  put  in  the 
concern,  in  cash,  $7,000,  and  is  possessed  of 
some  outside  means.  Locally,  the  concern,  at 
the  present  time,  are  considered  as  being  in 
fair  shape,  and  are  deemed  worthy  of  their 
moderate  business  requirements.  Additional, 
June  15,  1888:  Do  quite  a  wholesale  business 
with  the  smaller  places.  Brown  traveling  most 
of  the  time.  Claim  to  be  doing  at  the  rate  of 
$250,000  per  annum.  Liabilities  not  ascertain- 
able.  Handle  some  goods  on  commission. 
Hear  of  no  complaints.  Learn  they  are 
indebted  to  one  bank  $5,000. 


MERCANTILE  REPORTS  ANALYZED.         197 

ANALYSIS    AND   REMARKS. 

There  is  no  particular  flaw  to  pick  in  this 
statement,  except  that  it  fails  to  give  the  most 
essential  facts  necessary  to  be  known,  viz. :  the 
amount  of  liabilities  and  resources.  It  is  known 
that  those  who  have  had  dealings  with  them 
in  the  past,  have  had  trouble  and  delay  in  col- 
lecting. Their  reputation  for  punctuality  is  not 
good,  and  how  far  the  new  partner's  money 
may  help  them  is  difficult  to  say.  Eight  thou- 
sand dollars  to  a  wholesale  house  would  not  go 
far,  especially  when  it  is  already  embarrassed. 

Their  credit  seems  to  be  good  with  certain 
houses  to  the  extent  of  from  $6,000  to  $8,000, 
but  they  are  presumably  in  possession  of  facts 
which  the  report  fails  to  give.  On  the  report 
itself,  $1,000  on  sixty  days  would  be  a  liberal 
credit  for  any  house  to  make.  The  conservative 
house  would  keep  considerably  inside  of  that 
amount,  or  refuse  altogether,  without  further 
facts  and  figures,  which  they  decline  to  furnish. 
(The  mere  refusal,  however,  of  parties  to  give 
statements,  does  not  mean  absolutely  that  they 
are  "  shaky,"  or  can  not  make  a  satisfactory 
exhibit.  Some  refuse  because  they  feel  inde- 
pendent, and  ask  no  favors,  others  because  they 
are  pig-headed).  It  is  reasonable  to  suppose, 
obliged  as  they  are  to  ask  credit,  that  this 
concern  would  cheerfully  make  an  exhibit. 
Their  refusal  leaves  us  to  draw  our  own  con- 
clusions. 


198  WHOM  TO  TKTTST. 

[No.  12.] 

JOHN  SMITH,  Town  of  3,000  inhabitants,  near 
St.  Louis,  Mo. 

Retail  Grocer. 

Commenced  this  business  five  years  ago;  firm 
was  then  Smith  &  Co.,  the  "Co."  being  his 
father-in-law,  a  well-to-do  farmer,  who  retired 
two  years  ago  from  the  business.  Under  Smith 
&  Co.  the  firm  was  regarded  good,  and  enjoyed 
a  first-class  credit,  although  the  habits  of  Smith 
were  not  good,  and  this,  it  is  presumed,  caused 
the  father-in-law  to  drop  out.  He  declines  to 
give  a  statement.  His  stock  is  estimated  at  from 
$4,000  to  $5,000.  Does  a  large  credit  business 
with  the  farmers,  and  not  considered  a  sharp 
collector.  No  estimate  can  be  made  of  liabili- 
ties, which  he  says  are  for  current  bills  only. 
Considered  responsible  for  a  moderate  amount. 
Hear  no  complaints. 

ANALYSIS  AND  EEMAEKS. 

The  above  report  was  obtained  by  a  Chicago 
firm  to  determine  credit  on  mail  order  received. 
The  responsibility  of  the  party  would  seem  to 
be  sufficient  for  a  moderate  credit,  but  the 
question  comes  up:  Why  does  he  go  out  of  his 
way  to  buy  goods?  He  can  buy  the  same  goods 
as  cheap  in  St.  Louis,  at  a  saving  of  time  and 
freight,  and  that  would,  naturally,  be  the  place 
for  him  to  buy.  Men  do  not  go  out  of  their 


MERCANTILE   REPORTS   ANALYZED.         199 

way  to  pay  more  for  goods,  or  place  orders  to 
their  evident  disadvantage,  unsolicited  in  par- 
ticular. This  case  clearly  comes  under  the 
head  of  Miscellaneous  Information.  If  the 
facts  were  known,  as  they  probably  are  to  those 
who  have  heretofore  sold  him,  it  would  un- 
doubtedly appear  that  Smith's  credit  is  no 
longer  good  where  he  is  best  known.  Our 
thorough  system  of  working  the  trade  by  per- 
sonal solicitation  gives  a  "  good  dealer  "  hardly 
any  chance  or  excuse  for  seeking  new  alliances 
by  correspondence,  especially  on  staple  lines  of 
goods.  We  may  safely  put  it  down  that  if  this 
man's  trade  was  worth  having,  it  would  be  se- 
cured by  those  houses  to  whom  it  legitimately 
belongs. 


200  WHOM  TO  TKUST. 


CEEDIT  IMPLIES  RISK. 

After  reading  the  foregoing  reports,  which  we 
may  regard  as  applications  for  credit,  for  such 
they  are  in  fact,  or  after  examining  any  number 
of  others  as  they  come  before  us  in  the  regular 
course  of  business,  the  question  of  ' '  whether  to 
sell  or  not  to  sell, ' '  is  indeed  a  puzzling  one,  very 
often.  The  doubts  and  misgivings  of  the  man 
of  no  particular  experience  in  determining  such 
questions  are  so  clearly  portrayed  in  the  follow- 
ing lines,  On  Credit,  that  I  consider  them  enti- 
tled to  a  place  right  here  : 

To  sell  or  not  to  sell? 

That  is  the  question. 

Whether  it  is  better  to  send  the  goods 

And  take  the  risk  of  doubtful  payment, 

Or  to  make  sure  of  what  is  in  possession, 

And,  by  declining,  hold  them. 

To  sell;  to  ship;  perchance  to  lose — 

Aye,  there's  the  rub ! 

For  when  the  goods  are  gone, 

What  charm  can  win  them  back 

From  slippery  debtors  ? 

Will  bills  be  paid  when  due  ? 

Or,  will  the  time  stretch  out  till  crack  of  doom? 

What  of  assignments,  what  of  relatives, 

What  of  uncles,  aunts,  and  mothers-in-law, 

With  claims  for  borrowed  money? 

What  of  exemptions, bills  of  sale,  and  the  compromise 

That  coolly  offers  a  shilling  a  pound; 

And  of  lawyers'  fees 

That  eat  up  even  this  poor  pittance? 


CREDIT  IMPLIES  RISK.  201 

Yet  sell  we  must, 
And  some  we'll  trust. 
We  seek  the  just, 
For  wealth  we  lust; 
By  some  we're  cust; 
And  stocks  will  rust ; 
But  we  skip  the  wust, 
Or  we'd  surely  bust. 
— British  and  Colonial  Printer  and  Stationer. 

The  term  credit  implies  that  we  have  parted 
with  something  of  value,  and  for  which  value  is 
to  be  given  at  a  future  time.  It  is  not  convenient 
or  even  possible  for  the  buyer  of  the  property 
to  give  other  value  in  exchange,  on  the  spot,  and 
so  we  resolve  to  take  the  chances  on  what  time 
may  do.  What  it  will  do,  of  that  we  can  not 
be  absolutely  certain.  There  is,  then,  a  degree 
of  uncertainty  which  attaches  to  all  credit  trans- 
actions, some  more  and  some  less,  and  to  deter- 
mine these  varying  degrees  of  risk,  ranging 
from  apparently  uno  risk  to  all  risk,"  is  where 
the  critical  task  comes  in. 

But  we  need  not  be  without  our  bearings. 
The  sailor,  with  his  chart  and  compass,  though 
in  the  middle  of  a  tempestuous  ocean,  is  not 
altogether  ' c  at  sea. ' '  By  making  use  of  the  aids 
at  his  command,  and  the  experience  of  others 
before  him,  in  locating  the  danger-spots,  his 
risk  is  reduced  to  a  minimum  quantity. 


202  WHOM  TO  TRUST. 


INVENTORY  VALUATIONS. 

There  are  safe  and  unsafe  methods  of  doing 
business,  as  there  are  right  ways  and  wrong- 
ways  of  doing  things  in  general.  We  refer  now 
to  taking  stock,  or  inventory.  The  difference  of 
opinion  as  to  the  proper  course  to  be  adopted 
in  this  matter  seems  to  be  very  trifling;  but  the 
diversity  of  practice  is  very  great.  Strange  as 
it  may  seem  that  people  should  willfully 
deceive  themselves,  it  is  nevertheless  a  fact  that 
self-deception  is  of  every-day  occurrence  among 
business-men.  There  is  a  weakness  in  our 
human  nature  which  shows  itself  in  a  desire  to 
appear  for  more  than  we  are,  and  this  holds 
especially  good  in  a  financial  sense.  Nor  is  the 
desire  restricted  in  its  effect  on  others,  simply, 
but  it  operates  with  equal  force  on  our  own 
minds.  Yery  few  men  are  willing  to  gauge 
their  possessions  by  a  cash  standard.  Even 
when  this  is  ascertainable,  they  hope  to  realize 
more,  and  accordingly  place  a  fictitous  value  on 
them,  which  the  future  may  or  may  not  bear 
out.  No  deception  is  so  harmful  as  self-decep- 
tion to  the  man  of  business  in  the  matter  of 
dollars  and  cents. 

We  come  now  to  the  question,  what  do  we 
take  an  inventory  for  at  stated  intervals,  as  is 
the  custom?  First,  because  we  desire  to  Jcnow 
how  much  we  are  worth.  For  a  business-man, 


INVENTORY  VALUATIONS.        203 

a  knowledge  of  his  condition  is  necessary  in 
order  that  he  may  conduct  his  affairs  intelli- 
gently and  with  safety.  Secondly,  it  is  desira- 
ble to  know  whether  the  business,  for  a  given 
period,  has  been  profitable  or  otherwise.  The 
last  inventory,  compared  with  the  previous  one, 
will  indicate  this.  To  know  whether  a  business 
has  been  successful  or  not  for  the  previous 
twelve  months  is  of  the  utmost  importance.  To 
continue  a  business  that  is  unprofitable  is  not 
to  our  interest,  therefore  a  knowledge  of  such 
fact  would  determine  us  either  to  retire  from  it 
or  devise  ways  and  means  of  remedying  the 
evil. 

But,  what  is  our  property  worth?  In  a  strict 
sense,  it  is  worth  what  we  can  realize  from  it  in 
money,  whenever  it  may  be  desired  to  convert 
it.  Money  is  the  medium  of  exchange,  and  is 
our  standard  for  measuring  property  of  what- 
soever description.  This  might  mean  a  "forced 
sale"  valuation,  but  that  is  not  demanded  by 
even  the  strictest  rules  of  business  practice. 
What  can  be  realized  from  the  property  in  the 
ordinary  course  of  trade,  or  what  it  can  be 
duplicated  for,  furnishes  a  fair  and  safe  basis 
of  its  worth.  A  stock  is  worth  what  it  would 
cost  to  replace.  It  may  be  worth  more  or  less 
a  month  hence,  but  all  subsequent  variations  in 
value  enter  into  the  following  year's  profit  or 
loss  account,  or  inventory. 

The  plan  followed  by  conservative  houses  is 


204  WHOM  TO  TRUST. 

to  appraise  their  stock,  personal  and  all  other 
property,  at  the  lowest  cash  market  value. 
Some  are  still  more  conservative,  and  give  goods 
credit  for  cost  only  when  that  is  below  the  mar- 
ket, and  at  market  value  only  when  that  is 
below  cost.  The  first  plan  is  safe,  but  the  sec- 
ond is  safer,  and  as  no  injury  is  done  to  the 
owners  or  anyone  else,  it  might  commend  it- 
self. The  aim  should  be  to  appraise  our  prop- 
erty in  such  a  manner,  that,  if  we  should  sub- 
sequently decide  to  retire  from  business,  that 
we  should  realize  the  full  limit  of  our  calcula- 
tions. How  many  do  this? 

So  far  as  ascertaining  the  annual  profits  is 
concerned,  it  is  immaterial  how  the  inventory 
is  figured,  so  long  as  a  uniform  system  prevails 
from  one  year  to  another. 

Where  the  greatest  mistake  is  made,  how- 
ever, and  where  the  greatest  self-deception  is 
practiced,  is  on  old  stock,  goods  out  of  date, 
broken  assortments,  and"  odds  and  ends ' '  gener- 
ally, and  unless  great  care  is  exercised,  a  large 
quantity  of  these  will  be  on  hand  year  after 
year.  To  take  these  at  cost,  as  is  not  infre- 
quently done,  is  unsafe  and  unbusiness-like. 
They  have  an  auction-house  or  "job-lot "  value, 
and  the  proper  thing  to  do  is  to  ascertain  that 
before  each  inventory,  by  converting  them  into 
cash  by  auction  or  job-lot  sale.  Many  old  and 
reputable  houses,  after  doing  business  for  a 
life-time,  and  thinking  themselves  well-off, 


INVENTORY   VALUATIONS.  205 

have  found,  on  winding  up,  that  they  were 
comparatively  poor,  or  altogether  bankrupt, 
from  no  other  cause  than  giving  a  lot  of  rubbish 
a  fictitous  value  which  a  money  standard  would 
not  warrant. 

When  property  consists  of  a  manufacturing 
plant,  and  is  partly  composed  of  machinery, 
tools,  patterns,  fixtures,  etc.,  the  following 
plan  is  largely  adopted  in  regard  to  values:  All 
the  machinery,  tools,  etc.,  are  charged  to  ma- 
chinery account,  at  cost.  Labor  expended  in 
putting  them  up,  fitting  and  repairing,  is 
charged  into  expense  account  directly.  At  the 
end  of  each  year  the  machinery  account  is 
credited  with  a  percentage — say  10  per  cent.— 
for  wear  and  tear  and  depreciation.  If  the 
business  was  closed  out  the  first  year  or  so,  this 
method  would  not  cover  the  depreciation,  but 
in  carrying  it  on  permanently,  we  can  see  that 
in  ten  years  the  first  year's  investment  would 
stand  canceled  on  the  books.  Of  course,  even 
second-hand  machines  and  tools  have  a  value, 
and  when  this  is  reached,  the  discounting  pro- 
cess is  stopped.  It  is  simply  aimed  to  arrive  at 
a  fair  valuation,  and  at  which  the  property 
would  be  convertible. 

But  the  property  of  a  merchant  or  manufact- 
urer most  difficult  to  appraise  at  its  actual 
value,  consists  of  Accounts  and  Bills  Receiva- 
ble. There  are  few  accounts  that  we  can  be 
absolutely  sure  of.  Those  which  we  look  upon 


206  WHOM   TO   TEUST. 

as  the  best,  sometimes  turn  out  a  loss,  and  the 
more  doubtful  ones  come  in  all  right.  In  order 
not  to  be  misled  in  our  calculations  of  what  is 
due  us,  and  what  will  be  paid,  we  may  classify 
our  accounts,  etc.,  and  treat  each  class  separ- 
ately, by  a  general  average,  such  as  our  past  ex- 
perience indicates.  We  divide  them  into  three 
classes,  viz.: 

(1)  Accounts    and  notes  which  Jiave  been 
found  to  be  uncollectible  after  exhausting  all 

the  means  at  our  command.  These  should  be 
charged  up  to  profit  and  loss  account  and  ex- 
punged from  the  ledger. 

(2)  Accounts  against  estates  in  the  hands 
of  assignees  and  receivers.     These  should  be 
charged,   in  part,    to  profit  and  loss  account. 
We  may,  with  tolerable  safety,  depend  on  real- 
izing one-third  of  these ;  the  other  two-thirds 
charge  up.     This  is  by  no  means  an  under- val- 
uation. 

(3)  Accounts  past  due,  in  the  hands  of  at- 
torneys for  collection.     This  refers  to  such, 
where  the  responsibility  of  the  debtors  has  not 
yet  been  ascertained.     They  are  past  due,  and 
the  ordinary  methods  of  securing  payment  have 
failed.     They  may  or  may  not  be  collectible  by 
law.     Some  of  these  can  be  collected  in  full, 
others  in  part,  and  others  not  at  all,  and  it  is 
impossible  to  tell  which  is  which.     Charge  50 
per  cent,  of  these  to  profit  and  loss  and  you  will 
not  be  far  out  of  the  way.     It  is  assumed  here 


INVENTORY  VALUATIONS.  207 

that  all  accounts  are  placed  promptly  in  the 
lawyer' s  hands  when  not  settled  within  a  reason- 
able time  after  due.  In  class  3  only  ' '  live ' '  ac- 
counts are  contemplated. 

For  convenience,  accounts  under  class  3  may 
be  transferred  to  "Suspense  Account,"  and 
50  per  cent,  of  the  total  be  charged  to  profit 
and  loss.  This  leaves  us  50  per  cent,  of  their 
face  value  to  inventory.  The  same  may  be 
done  with  class  2,  Profit  and  Loss  Dr.  to  Sus- 
pense Account  66|  per  cent.,  leaving  33^  per 
cent,  to  inventory  as  available  assets. 

Because  accounts  are  charged  up  to  profit 
and  loss  and  balanced  on  our  ledger,  does  not 
signify  that  we  are  to  lose  sight  of  them.  A 
profit  and  loss  ledger,  independent  of  the  reg- 
ular books,  is  usually  kept,  and  old  claims  are 
thus  looked  after.  Some  of  these  are  resur- 
rected occasionally  by  watching  them  and 
keeping  track  of  the  movements  of  our  defunct 
debtors.  An  entry  now  and  then  on  the 
credit  side  of  profit  and  loss  does  not  mar  the 
looks  of  that  account. 

The  bearing  that  this  chapter  has  on 
4 '  credits ' '  will  be  apparent  when  it  is  con- 
sidered that,  as  a  rule,  we  rely  almost  entirely 
on  the  applicants  for  credit  themselves  for  the 
estimates  placed  on  their  capital  and  resources. 
Whether  the  estimates  and  figures  are  made  on 
a  basis  of  actual  value,  or  whether  unsalable 
goods  and  worthless  accounts  make  up  the  sum 


208  WHOM   TO   TRUST. 

total,  largely  or  in  part,  is  beyond  our  means 
of  ascertaining.  But  appreciating  the  fact  that 
over-estimates  are  the  rule,  and  fictitious  valua- 
tions are  not  infrequent,  more  from  lack  of 
good  business  methods  than  from  bad  inten- 
tions, perhaps,  the  necessity  becomes  manifest 
of  making  allowance  for  a  liberal,  average 
shrinkage. 


PAST-DUE  ACCOUNTS.  209 


PAST-DUE  ACCOUNTS. 

Out  of  every  ten  accounts  that  are  lost,  it  is 
safe  to  estimate  that  only  one  is  lost  before 
maturity.  The  other  nine  were  still  good  at 
maturity,  and  if  the  proper  effort  had  been 
made  at  the  time  to  collect,  they  could  have 
been  saved  in  the  majority  of  cases.  The  fact 
follows,  then,  that  we  make  nine-tenths  of  our 
losses,  approximately,  by  allowing  accounts  to 
run,  either  by  voluntarily  extending  the  time, 
or  by  suffering  them  to  drag  for  one  reason  or 
another. 

Usually,  it  is  for  reasons  of  so-called  policy 
—policy  in  other  respects;  but  in  no  direc- 
tion will  it  be  found  to  serve  our  interest  or 
accomplish  a  desired  purpose. 

We  are  confronted  with  the  fact,  of  course, 
that  mercantile  bills  or  open  accounts  are  not 
looked  upon  like  an  obligation  to  a  bank  that 
must  be  paid  on  a  certain  day  and  by  a  certain 
hour;  at  any  rate,  comparatively  few  merchants, 
taking  them  all  in  all,  have  educated  themselves 
up  to  this  standard.  Where  we  find  one  that 
has,  we  find  five  who  have  no  idea  of  meeting 
even  a  note  on  the  day  it  is  due. 

But  accepting  things  as  we  find  them  in  refer- 
ence to  accounts,  until  they  have  become  due, 
they  cause  us  no  anxiety,  nor,  in  fact,  have  we 
any  claim,  in  law,  against  our  customer  until 

14 


210  WHOM  TO  TRUST. 

then.  It  is  only  when  the  account  has  matured 
that  the  critical  time  comes  for  the  creditor, 
and,  even  then,  not  till  some  days  have  elapsed 
for  the  debtor  to  make  his  payment.  On  a 
note  there  is  three  days'  grace,  and  it  is  either 
honored  or  dishonored;  but  on  an  open  account 
no  fixed  time  governs  the  case.  The  debtor 
may  take  ten  or  twenty  days'  grace  without  our 
consent  and  without  our  feeling  justified  even 
in  making  a  peremptory  demand.  This  much 
extra  time  we  give  and  have  to  give,  almost 
unavoidably,  before  any  anxiety  or  doubt  is 
awakened  in  our  minds  as  to  the  goodness  of 
the  claim.  After  that,  a  series  of  letters  are 
written  demanding  settlement,  and  more  time 
is  consumed,  resulting  in  this,  that  about 
thirty  days  are  lost,  after  maturity  of  a  bill, 
before  the  fact  is  ascertained  whether  non- 
payment is  due  to  carelessness,  lack  of  good 
business  methods,  unwillingness,  or  inability  to 
pay;  and  which  of  these  four  reasons  applies, 
is  not  always  determinable  even  then. 

By  the  bank-draft  system  adopted  by  most 
houses,  this  loss  of  time  can  be  materially 
shortened.  Accounts  not  paid  within  a  couple 
of  days  after  due  are  drawn  for  at  sight.  If 
not  accepted  on  presentation  or  paid  when  due 
after  acceptance,  it  is  the  bank's  duty  to  return 
the  draft  at  once.  If  the  bank  attends  to  its 
collection  department  promptly  and  on  bank- 
ing principles,  we  either  have  our  money  or  the 


PAST-DUE  ACCOUNTS.  211 

draft  returned  to  us  inside  of  ten  days  or  less, 
and  the  loss  of  time  is,  therefore,  small.* 

Now,  then,  default  of  payment  having  been 
made  and  the  usual  methods  having  failed  to 
bring  payment,  we  are  forced  to  these  conclu- 
sions: Either  our  judgment  was  poor  in  making 
the  credit  in  the  first  place,  or  the  premises  on 
which  judgment  was  based  were  wrong,  or 
we  acted  carelessly  and  without  sufficient  cir- 
cumspection. We  frequently  trust  men  whose 
actual  capital  and  financial  status  would  not 
entitle  them  to  credit.  We  do  this  very  often 
on  the  strength  of  reported  good  business  qual- 
ities, a  past  record  for  promptness,  and  other 
favorable  conditions.  But  when  the  test  comes 
and  we  find  ourselves  disappointed,  the  party 
then  has  forfeited  every,  claim  to  credit  and 
confidence.  In  cases  of  this  kind,  no  time 
must  be  lost  in  securing  claim .  Although  col- 
lection might  not  be  enf orcible  by  law  for  lack 
of  tangible  property,  yet  the  debtor  has  a  fair 
business,  and  he  can  not  afford  to  allow  Ms 
standing  and  his  prospects  to  be  injured,  and 
so  by  pushing  our  claim  energetically,  the 
chances  are  in  favor  of  getting  our  money. 

In  the  majority  of  cases,  we  can  not  know  why 
bills  are  not  met.  To  ascertain  this  at  once,  is 

*  NOTE. — Where  banks  are  called  upon  only  occasionally  to 
make  collections  for  us,  inclose  postage  for  return  of  unpaid 
drafts.  It  is  only  right  to  do  this,  and  the  service  will  be 
more  prompt. 


212  WHOM   TO   TRUST. 

of  the  utmost  importance,  and  to  this  end  the 
best  and  latest  information  should  be  obtained 
in  order  that  we  may  decide  quickly  whether 
our  claim  would  be  jeopardized  by  the  necessary 
delay  in  trying  "moral  suasion."  Lawyers' 
services  absorb  our  profits  and  cause  expense, 
and  we  are  eager,  of  course,  to  save  the  one  and 
avoid  the  other;  therefore,  when  we  can  satisfy 
ourselves,  beyond  doubt,  that  an  account  is  col- 
lectible by  law,  we  may,  in  these  exceptional 
cases,  defer  legal  action  for  a  little  time  while 
making  our  best  efforts  to  collect  without  legal 
process. 

But  these  cases  will  be  found  rare.  After 
diligent  inquiry  we  are  generally  in  doubt  as  to 
the  real  cause  for  non-payment;  but  whatever 
the  reason  may  be,  it  is  tantamount  to  the 
debtor's  untrustworthiness  thenceforth.  Delay 
would  be  dangerous,  and  as  the  customer  is  no 
longer  a  desirable  one,  our  only  policy  is  that 
which  our  safety  demands,  viz. ,  to  enforce  col- 
lection by  law  at  once. 

I  have  divided  our  delinquent  debtors  into 
three  classes,  viz.:  Those  of  Insufficient 
Responsibility,  Doubtful  Responsibility,  and 
Undoubted  Responsibility.  The  first  and  sec- 
ond brook  no  delay,  for  it  is  better  to  lose  our 
profits  in  fees  to  the  lawyer  and  save  the  prin- 
cipal, than  by  delay  to  lose  both.  In  the  third 
class,  delay  not  being  attended  with  any 
apparent  risk,  we  may  try  to  save  expense,  and 


PAST-DUE  ACCOUNTS. 

endeavor,  by  the  ordinary  tactics,  to  make  our 
claim.  Our  course,  with  reference  to  this  class, 
will  naturally  be  dictated  by  policy,  or  by  our 
own  necessities;  but  this  we  must  do:  Have  a 
time  and  a  day  set  when  payment  will  be  made. 
Insist  upon  this,  as  you  have  a  right  to;  and, 
secondly,  insist  upon  punctual  discharge  of  the 
promise.  If  this  promise  is  again  violated, 
disregard  further  excuses,  however  plausible, 
and  get  your  money. 

It  may  seem  impracticable  or  impolitic  to 
some  to  follow  the  rules  laid  down  here.  They 
are  correct,  however,  not  only  in  theory,  but  in 
practice,  as  many  houses  can  testify  from  their 
own  experience.  The  more  and  the  nearer  we 
can  bring  ourselves  to  work  on  certain  rules 
and  principles,  and  stick  to  them,  keeping  aloof 
from  all  personal  influences  and  appeals  to  our 
sympathies — which  in  business  shows  only 
weakness,  after  all — the  smaller  will  be  our 
loss,  and  this  is  applicable,  not  alone  to  credits, 
but  to  business  in  general. 

It  is  an  established  law  that  "  we  act  in  the 
line  of  least  resistance."  To  make  our  own 
collections  promptly,  so  as  to  be  able  to  pay 
promptly,  requires  constant  and  timely  ex- 
penditure of  energy,  and  is,  therefore,  in  the 
line  of  greatest  resistance — just  the  opposite  of 
our  natural  inclinations.  It  can  not  be  denied 
that  nearly  all  our  customers  would  be  "  slower 
pay"  than  they  are  if  we  consented  to  the 


214  WHOM  TO  TRUST. 

arrangement.  In  a  great  measure,  therefore,  we 
are  responsible,  as  creditors,  for  the  habits  they 
fall  into,  and  the  responsibility  involves  more 
than  a  bad  habit  in  them — it  involves  our  capi- 
tal and  our  welfare.  As  between  two  houses 
that  could  be  named,  having  bills  maturing  on 
the  same  day  with  the  same  customers,  it  would 
not  be  difficult  to  say,  if  only  one  house  could 
be  paid  on  time,  which  would  get  the  prefer- 
ence. It  is  a  question  very  largely  of  the  kind 
of  impressions  we  make  on  those  who  are  our 
debtors,  as  to-  the  respect  they  entertain  for  our 
methods  and  the  degree  of  effort  they  feel 
themselves  called  upon  to  make  for  us. 


COLLECTIONS.  215 

COLLECTIONS. 

A  synopsis  of  the  laws  of  the  different  States 
pertaining  to  collections  and  insolvency,  is 
easily  obtained  and  digested.  The  statutory 
laws  on  assignments,  receiverships,  exemp- 
tions, mortgages,  limitations,  attachments, 
chattel  mortgages,  etc.,  with  which  the  busi- 
ness-man is  mainly  concerned  in  the  collection 
of  his  accounts,  are  much  the  same  in  all  the 
States,  and  are  largely  copied  from  the  old 
English  Common  Law.  Arrest  and  impris- 
onment for  ordinary  debt  is  done  away  with, 
and  while  this  may  operate,  in  some  instances, 
with  too  much  leniency,  and  more  than  was 
contemplated,  yet,  in  the  main,  it  shows  evi- 
dence of  advancement,  and  is  in  keeping  with 
our  more  modern  conceptions  of  humanity  and 
sympathy  for  the  unfortunate. 

In  Germany,  France,  and  other  countries, 
rigorous  methods  are  still  enforced  against 
bankrupts,  and  imprisonment  for  debt  is  not  a 
rare  occurrence.  In  England,  though  the  laws 
as  they  stand  are  quite  as  severe,  they  are  not 
as  rigorously  enforced.  Imprisonment  for  debt 
must  be  admitted  to  be  a  relic  of  despotism, 
but  it  is  gradually  being  expunged.  Where 
commerce  is  least  developed,  the  clause  is  most 
enforced,  and  where  we  find  the  highest  devel- 
opment, it  is  least  enforced. 


216  WHOM  TO  TRUST. 

To  imprison  the  man  who  is  in  our  debt,  and 
who  is  unable  to  pay;  to  shut  him  up  and  deny 
him  the  opportunities  of  doing  anything  to 
help  himself  or  us,  does  seem  to  be  the  most 
idiotic  proceeding  imaginable.  Besides  the 
inhumanity  of  the  practice,  it  is  so  thoroughly 
opposed  to  our  own  interests,  so  thoroughly 
"uncommercial"  for  people  engaged  in  com- 
merce, that  we  wonder  it  survived  as  long  as  it 
has.  An  Indian,  who  was  incarcerated  in  jail 
in  Albany,  in  default  of  payment  of  a  certain 
number  of  beaver-skins  (then  taken  as  cur- 
rency), made  the  common-sense  remark,  which 
strikes  home,  ' '  That  the  prison  was  a  mighty 
bad  place  to  catch  beaver." 

One  or  two  centuries  ago,  the  laws  and 
statutes  were  looked  upon  as  fixed  stars,  and 
therefore  unchangeable.  Every  interest  and 
act  of  man  had  to  conform  to  the  law  as  it 
existed.  The  view  would  seem  to  have  been 
held  that  laws  were  made  first,  and  that  man 
came  afterward  and  accepted  them,  just  as  he 
does  Nature's  laws. 

But  happily  we  have  changed  this.  At  the 
present  time  we  make  and  repeal  our  laws,  and 
adapt  them  to  the  progressive  wants  of  man, 
and  of  society,  with  a  view  to  promoting  the 
welfare  of  the  community,  and  by  thus  revers- 
ing the  spirit  of  our  laws,  we  have  made  a 
decided  move  onward  and  upward. 

Our  legislative  and  judicial  departments  per- 


COLLECTIONS.  217 

form  their  functions  no  longer  arbitrarily,  but 
with  due  reference  to  the  manifold  industries 
in  which  man  is  engaged.  It  is  no  longer  a 
question  of  what  does  the  law  allow  us  to  do, 
but  what  laws  do  we  need,  and  that  will  best 
subserve  our  interests,  either  in  protecting  or 
developing. 

In  proof  of  what  has  been  stated  here,  we 
may  cite  the  Bankrupt  law,  which  at  three 
different  periods  in  the  country's  history  was 
put  into  force,  and  each  time,  after  having 
given  the  relief  sought,  it  was  repealed,  and 
both  the  enforcement  and  the  repeal  were 
equally  wise  and  expedient.  At  each  of  these 
periods,  the  provisions  of  the  Bankrupt  law 
were  invoked  for  the  benefit  of  the  debtor  class, 
who,  by  severe  panic  and  depression,  had 
become  hopelessly  involved.  The  interests  of 
commerce,  its  life  and  vitality,  demanded 
relief  for  a  large  number  of  helpless,  though 
otherwise  active  and  useful,  members  of  the 
business  community.  That  this  law  did  not 
operate,  and  never  will,  for  the  benefit  of  the 
creditor  class,  directly,  has  been  fully  demon- 
strated, nor  has  that  ever  been  its  purpose. 

Efforts  have  been  made,  at  various  times 
since  its  repeal  in  1878,  to  have  a  permanent 
Bankrupt  law  passed,  but  with  no  success. 
The  defeat  of  the  movement  may  be  taken  as 
indicative  of  an  adverse  sentiment  among 
business-men.  In  ordinary  times  it  can  sub- 


218  WHOM  TO  TRUST. 

serve  no  good  end.  Its  administration,  as 
experience  proves,  is  not  economical,  but 
wasteful  of  the  debtor's  assets.  Its  operation  is 
subversive  of  the  creditor' s  interests,  instead  of 
being  beneficial,  and  they  are  better  protected, 
or  rather,  can  protect  themselves  better,  under 
the  State  Statutory  law. 

Practically,  the  debtor  enjoys  all  the  advan- 
tages under  the  State  laws,  that  the  Bankrupt 
law  can  confer.  If  the  insolvent  of  to-day  can 
show  good  cause  why  he  should  be  discharged 
from  his  debts,  after  paying  all  that  he  can,  he 
usually  finds  no  difficulty  in  getting  an  honor- 
able discharge.  The  man  who  is  entitled  to  it 
(and  this  includes  all  except  the  downright 
thief),  can  safely  depend  on  the  acquiescence 
of  his  creditors  in  any  reasonable  proposition 
for  settlement. 

Under  our  State  laws  it  is  "first  come,  first 
served."  The  creditor  who  gets  ahead  with  his 
claim  takes  the  persimmons.  The  wide-awake 
merchant  finds  no  fault  with  this  arrangement. 
(The  law  of  Minnesota  undertakes  to  prevent 
preferences  being  given  or  obtained,  but  in 
other  States  no  such  provision  is  made.)  Since 
the  creditor's  safety  rests,  then,  on  his  vigil- 
ance, it  behooves  him  to  be  on  the  alert.  Good 
management  of  the  collection  department  has 
its  reward  under  our  present  system,  which  is 
not  the 'case  under  a  bankrupt  law.  Under 
this,  from  and  after  the  time  that  insolvency 


COLLECTIONS.  219 

can  be  established  by  any  act,  all  the  creditors 
are  supposed  to  have  equal  rights,  and  prefer- 
ences or  securities  obtained  subsequently  are 
held  to  be  unlawful. 

Whether  we  are  extending  credit  under  our 
State  laws,  or  the  Bankrupt  law,  concerns  the 
larger  houses  more  particularly,  and  the  latter 
operates  especially  against  these.  Many  of  the 
wholesale  firms  carry  their  customers  for  large 
amounts,  in  consideration  of  the  latter1  s  trade, 
and  this  arrangement  is  for  mutual  benefit.  It 
ties  the  customer  to  some  one  house,  and  the 
relations  between  buyer  and  seller  are  of  a  very 
close  and  confidential  nature.  Whenever  the 
creditor  has  reason  to  become  uneasy,  his  claim 
is  sufficiently  large  to  demand  security,  and  he 
usually  gets  it.  The  smaller  creditors  are 
left  out  "  in  the  cold,"  in  case  of  a  foreclosure 
by  the  secured  creditor.  This  happens  every 
day.  But  under  the  Bankrupt  law,  the  larger 
creditor  could  not  secure  himself,  to  the  detri- 
ment of  other  creditors,  and,  knowing  this,  he 
would  feel  the  need  of  greater  conservatism  in 
extending  credit. 

So,  all  in  all,  our  State  laws  may  be  consid- 
ered f  ally  adequate  to  our  business  needs  and 
protection,  and  the  law  of  "  the  survival  of  the 
fittest"  comes  into  play. 


220  WHOM  TO  TRUST. 


COLLECTIONS— METHODS  EMPLOYED. 

The  large  and  constantly  increasing  number 
of  collection  agencies  and  lawyers,  who  make 
a  specialty  of  collecting  past-due  accounts, 
would  indicate  that  there  is  an  immense  field 
for  work  in  this  line.  The  best  way  is  not  to 
have  to  employ  them  ;  but  since  their  employ- 
ment by  us  is  unavoidable,  we  must  seek  the 
best  the  market  affords. 

The  plan  of  the  collection  agencies  is  to  se- 
cure the  addresses  of  attorneys  in  every  town, 
county,  and  city,  and  your  claim  is  sent  to 
these  attorneys  by  the  agency  to  whose  care  it 
has  been  intrusted.  The  collection  charges  are 
usually  guaranteed  to  be  no  more  than  if  the 
claim  was  sent  direct  by  you,  and  it  is  further 
guaranteed  that  claims  coming  through  these 
will  receive  better  attention.  How  far  these 
promises  are  made  good,  depends  largely  on 
the  agency,  and  much  care  is  necessary  in  your 
selection.  In  the  first  place,  their  financial 
responsibility  should  be  unquestioned ;  and, 
secondly,  you  should  convince  yourself  that 
their  selection  of  attorneys  is  made  from  the 
best  ranks  in  the  profession. 

Lists  of  attorneys  throughout  the  country 
are  accessible  to  everybody,  and  it  is  no  trick  to 
start  a  collection  agency ;  but  it  does  seem 
to  be  quite  a  trick  to  get  satisfactory  service 


COLLECTIONS — METHODS  EMPLOYED.       221 

from  most  of  them.  But  find  one,  good  and 
reliable,  and  it  will  save  you  much  time  and 
annoyance  in  looking  after  your  claims  your- 
self, besides  probably  securing  better  results. 

Where  a  good  deal  of  collection  business  has 
to  be  done  by  houses,  direct  communication 
with  attorneys  has  been  found  preferable. 
While  this  method  involves  more  work  and  at- 
tention at  your  hands,  it  has  the  advantage  of 
making  all  instructions  direct  instead  of 
through  an  intermediary,  and  the  attorneys 
will  work  for  you  just  as  cheaply  and  just  as 
efficiently  as  for  the  agencies,  if  not  better. 

By  becoming  a  subscriber  to  a  good  agency, 
it  furnishes  you  a  list  of  attorneys,  both  for  col- 
lecting and  reporting.  The  experience  of  every 
house  proves  that  quite  a  large  percentage  of 
claims  is  lost  by  dilatoriness  on  the  part  of  at- 
torneys. This,  however,  is  quite  as  much  the 
fault  of  the  client  as  of  the  attorney.  If  the 
attorney  takes  your  claim  and  commences  suit 
instanter,  he  is  liable  to  be  blamed  and  charged 
with  an  inordinate  desire  to  make  costs  and  fees, 
especially  if  he  accomplishes  nothing  by  it.  In 
the  absence  of  special  instructions,  therefore, 
he  will  always  try  to  clear  himself  from  any 
imputation  of  that  kind. 

When  an  account  gets  into  such  shape  as  to 
require  the  services  of  an  attorney,  the  inference 
is  that  you  have  waited  as  long  as  you  care  to, 
and  safety  warrants.  In  either  case  you  want 


222  WHOM   TO   TRUST. 

payment  of  your  claim.  You  have  given  all 
the  time  and  indulgence  that  is  deemed  pru- 
dent or  your  own  interest  justifies.  That 
being  the  case,  let  positive  instructions  accom- 
pany your  claim,  and  these  should  be  right  to 
the  point.  "Collect,  or  if  more  time  is*  asked, 
get  security.  If  not  paid  or  secured  at  once, 
commence  suit  and  enforce  collection  by  law 
with  the  least  possible  delay."  Go  on  the  plan 
that  when  you  employ  an  attorney  it  is  not  to 
grant  further  indulgence  or  to  accept  further 
excuses,  but  to  practice  the  law,  and  the  more 
summarily  this  is  done,  the  better  for  your 
claim,  always. 

We  are  prone  to  send  our  collections  and  de- 
pend on  our  attorneys  for  advice,  and  let  them 
do  as  they  think  best.  But  the  merchant  needs 
no  advice  in  the  matter  of  an  ordinary  collec- 
tion. He  is  his  own  best  counselor  on  the 
merits  of  a  past-due  account.  It  is  not  a  ques- 
tion of  law,  but  of  bringing  the  law  to  our  aid 
and  getting  what  belongs  to  us. 

Positive  instructions  are  of  advantage,  for 
other  reasons.  Attorneys  are  human,  like 
other  people  ;  their  feelings  and  sympathies 
are  fully  as  susceptible.  Acquaintance,  and 
often  friendship,  between  attorney  and  defend- 
ant, place  him  in  an  awkward  position  in  mat- 
ters left  discretionary  with  him.  He  intends  to 
do  his  duty  by  his  client,  but  aims  also  to  fa- 
vor the  defendant  as  much  as  possible,  and  the 


COLLECTIONS — METHODS  EMPLOYED.       223 

result  is  that  valuable  time  is  lost  and  your 
claim  is  often  the  worse  for  the  delay.  But 
whatever  may  be  the  relationship  between  at- 
torney and  defendant,  if  the  attorney  has  posi- 
tive instructions,  of  which  fact  he  can  convince 
the  defendant,  the  latter  can  find  no  fault,  for 
there  is  no  room  left  for  the  use  of  discretion- 
ary power.  Again,  the  attorney  of  your  selec- 
tion may  also  be  retained  by  the  other  side. 
This  not  infrequently  happens.  Let  the  in- 
structions include  the  request  that  if  he  can 
not,  for  any  reason,  attend  to  your  claim  as 
desired,  to  return  it  at  once. 

It  is  sometimes  a  question  whether  a  claim 
is  worth  incurring  further  expense  on.  In  a 
case  of  this  kind  your  attorney  may  be  able  to 
advise  you,  and  this  will  be  necessary  before 
you  can  give  definite  instructions  as  to  the 
course  you  wish  to  pursue.  We  come  too  late 
with  our  claims  sometimes,  and  where  there  is 
no  prospect  of  making  them,  it  would  be  use- 
less to  waste  money.  Such  claims,  by  watch- 
ing them,  can  frequently  be  made  in  whole  or 
part,  but  if  not,  they  can  be  put  in  judgment 
before  they  become  outlawed,  if  the  prospects 
later  on  warrant  the  expense. 


224  WHOM  TO  TRUST. 


SHARP  COLLECTORS. 

We  are  in  business  to  make  money,  and  not 
simply  for  the  accommodation  of  the  public. 
Upon  this  we  all  are  agreed,  as  an  abstract  prop- 
osition, but  how  is  it  in  practice?  If  anybody 
should  intimate  that  you  did  business  for 
accommodation,  the  accusation  would  be  re- 
sented, no  matter  how  charitably-inclined  you 
might  be,  or  how  philanthropic  it  may  sound. 
You  would  naturally  say:  "If  I  want  to  do 
charity  work  I  can  do  ifc  in  an  easier  way.  I 
can  dole  out  my  money  and  property  without 
the  work  and  worry  of  business."  And  yet 
how  many  merchants,  and  especially  retailers, 
there  are  who  conduct  their  business  on  that 
principle.  To  be  sure,  accommodation  cus- 
tomers can  be  found  in  abundance,  and  goods 
need  not  become  rusty  or  musty  waiting  for 
that  class. 

But  that  is  not  the  way  of  the  successful 
business-man.  He  looks  sharp  after  his  col- 
lections, and  does  not  want  customers  who  do 
not  pay  promptly.  His  goods  will  keep  until 
he  can  exchange  them  for  something  beside 
uncertain  accounts.  He  calculates  that  while 
he  is  in  business  he  will  have  something  to  say 
about  the  terms  of  payment,  etc.  These  he 
will  make  as  long  as  the  nature  of  the  goods 
will  warrant,  but  whoever  buys  them  on  his 


SHARP  COLLECTOES.  225 

terms,  is  required  to  meet  the  payments 
promptly  at  maturity.  Houses  are  prone  to 
carry  customers  because  they  think  them 
good.  On  the  other  hand,  those  that  are  not  so 
good,  or  not  good  at  all,  have  to  be  carried 
because  immediate  collection  can  not  be 
enforced. 

With  the  former  class  it  is  carrying  volun- 
tarily, and  with  the  latter,  it  is  compulsory, 
and,  to  sum  up,  they  are  carrying  all  their 
trade  and  furnishing  them  capital.  This  is 
doing  business  on  the  accommodation  plan. 

But  it  does  not  pay.  There  is  neither  profit, 
safety,  nor  common  sense  in  this  method  of  doing 
business.  Even  in  cases  where  we  have  every 
reason  to  believe  a  customer  responsible  and 
undoubtedly  good  for  his  account  to  us,  we  are 
not  justified  in  carrying  him  indefinitely,  for 
the  reason  that  any  number  of  mishaps,  beyond 
the  control  of  any  man,  may  happen,  which  will 
endanger  our  safety  as  creditors.  Fire,  floods, 
sickness,  death,  and  innumerable  other  unex- 
pected and  unforeseen  things  may  occur,  and 
are  daily  occurring,  which,  though  they  may 
not  always  result  in  total  loss  of  our  account, 
are  yet  sufficient  to  tie  up  a  portion  of  our 
working  capital,  and  every  time  we  extend  an 
account,  it  must  be  borne  in  mind  that  we  incur 
all  these  risks. 

The  largest  and  most  successful  houses  are 
prompt  in  making  their  collections,  and  it  may 

15 


226  WHOM   TO   TEUST. 

be  claimed  that  this  very  feature  in  the  con- 
duct of  their  affairs  has  made  them  so  emi- 
nently successful.  The  answer  might  be  made 
that  they  can  afford  to  be  independent.  Yes, 
and  they  always  were,  from  a  very  small  begin- 
ning. If  business-men,  as  a  rule,  both  whole- 
sale and  retail,  would  insist  more  on  punctual 
compliance  with  terms  and  time  engagements, 
it  would  be  a  blessing  and  a  saving  to  creditor 
and  debtor  alike. 

The  timid  creditor  gains  nothing  by  his  tim- 
idity. Let  your  customer  understand  that 
when  his  account  is  due  it  must  be  paid,  and 
he  will  pay  it  unless  your  judgment  of  him 
was  wrong  to  start  with;  and  when  he  wants 
goods  and  you  have  anything  to  offer  him,  he 
will  buy  of  you  more  readily  than  of  a  house 
with  whom  he  is  already  in  arrears. 

By  letting  accounts  and  customers  run 
behind,  the  experience  of  old-established 
houses  is,  that  you  sell  them  fewer  goods,  in 
the  long  run,  than  by  adopting  the  other  course; 
but  this  is  only  one  of  the  bad  features  of  in- 
dulgence. 

It  is  a  positive  fact  that  the  prompt  col- 
lectors are  the  most  respected  by  the  trade,  and 
stand  highest  in  the  community,  and  another 
incontrovertible  fact  is,  that  they  lose  no  trade  by 
it  that  is  worth  having.  A  third  very  valuable 
point  gained  is,  that  you  can  handle  your  busi- 
ness and  your  capital  to  the  utmost  advantage, 


SHAKP   COLLECTOES.  227 

and  give  your  customers  better  and  more  satis- 
factory service.  This  feature  alone  draws  to 
you  the  better  class  of  trade. 

As  between  the  easy,  pay-when-you-like 
method  and  that  of  the  house  which  insists  on 
prompt  payments,  and  fulfillment  of  engage- 
ments, it  is  .not  difficult  to  see  and  enumerate 
many  advantages  that  the  latter  has  over  the 
former.  To  look  sharp  after  our  collections  is 
one  of  the  most  essential  things  in  business, 
and  our  success  depends  on  it  more  than  on 
any  other  single  factor. 


228  WHOM  TO   TRUST. 


REFERENCES. 

References,  when  given  by  strangers  to  obtain 
credit  from  us,  should  be  taken  with  a  good  grain 
of  allowance  and  be  viewed  with  great  caution. 
Much  credit  is  given  on  the  strength  of  these. 
Whenever  any  one  refers  you  to  another,  that 
other's  opinion  will  be  a  good  one  invariably. 
Do  you  suppose  any  one  would  give  you  a  ref- 
erence that  would  turn  against  him  and  be 
detrimental  to  him?  It  hardly  looks  reason- 
able. 

The  party  referred  to  usually  occupies  one  of 
several  positions,  and,  we  may  say,  his  opinion 
is  dominated  by  either  friendliness,  indiif erence, 
or  self-interest.  When  not  pecuniarily  inter- 
ested himself,  he  rarely  knows  the  true  position 
of  the  party  seeking  recommendation.  Being 
under  no  pressure  to  investigate,  he  very  likely 
looks  upon  the  lenient  and  charitable  side  of 
the  case  and  says  all  the  good  he  can,  for  that  is 
expected  of  him.  He  is  called  upon  to  tell  the 
truth,  and  this  he  does;  but  he  is  not  obliged  to 
tell  all  he  knows.  We  dislike  to  say  anything 
derogatory  of  any  man  in  trade,  and  especially 
if  he  refers  to  us  and  expects  our  good  offices. 
Though  ofttimes  perversive  of  good,  we  may 
look  upon  this  charitable  phase  of  human 
nature  in  business  as  very  exalted  and  highly 
commendable  of  itself. 


REFEKENCES.  229 

If,  on  the  other  hand,  the  referee,  or  party 
referred  to,  is  interested  pecuniarily  in  the 
referring  party,  who  is  a  customer,  we  will  say, 
though  not  perhaps,  the  most  desirable  in 
every  way,  the  law  of  self-interest  is  apt  to 
come  to  the  surface.  If  good  can  be  said,  we 
say  it  with  great  pleasure  and  satisfaction.  If 
not  so  good,  we  say  less.  Our  own  business 
relations  and  safety  depend  upon  his  success, 
and  the  latter,  again,  depends  upon  his  ability 
to  get  accommodations  from  others,  and  our 
cognizance  of  this  fact  prompts  us  to  aid  him 
all  we  can.  In  all  this,  it  may  be  said,  the 
mind  operates  quite  unconsciously  of  any 
wrong-doing. 

Another  feature  is  this:  There  is  hardly  a 
man  who  has  not  one  or  more  friends,  especi- 
ally if  he  is  a  business-man.  Some  one  of  the 
many  he  trades  with  can  always  be  relied  on  to 
give  a  good  account  of  him,  though  so  far  as  the 
many  are  concerned,  this  would  probably  have  to 
pass  for  a  " minority  report."  A  man  always 
puts  his  best  foot  forward,  and  in  giving  refer- 
ences, he  will  be  sure  to  give  such  as  will  bene- 
fit him.  An  opinion  from  all  those  he  deals 
with  would  probably  differ,  and  furnish  a  more 
correct  basis  to  work  from. 

Bank  references  are  usually  considered  of  a 
very  high  order,  and  place  the  giver  very  high 
in  our  estimation.  The  man  who  can  lay  claim 
to  the  right  of  referring  to  his  banker,  we  look 


£30  WHOM  TO  TETJST. 

upon  as  gilt-edged.  But  we  find  by  experience 
that  a  banker' s  opinion,  as  he  gives  it  to  us,  at 
any  rate,  is  very  liable  to  be  misleading.  Indif- 
ference, or  self-interest,  also  govern  his  state- 
ments. It  is  always  with  reluctance  that 
bankers  allow  themselves  to  be  used  as  in- 
formers or  mercantile  agencies.  They  studiously 
avoid  saying  anything  of  a  disparaging  nature 
of  their  townspeople,  whether  customers  or 
not.  That  they  usually  know  more  than  they 
tell,  is  unquestionable. 

If  the  banker,  whose  opinion  you  ask  of  a 
certain  merchant,  happens  to  be  a  creditor  him- 
self, he  will  tell  you  that  he  has  confidence 
enough  in  him  to  loan  him  money,  and  this  he 
emphasizes  in  a  manner  so  as  to  carry  the  con- 
viction that  this  ought  to  be  sufficient  evidence 
of  his  worthiness  and  claim  to  credit.  Our 
minds  are  set  at  rest  by  this  practical  demon- 
stration of  confidence,  but  in  case  the  party 
fails  soon  after,  what  do  we  find?  It  is  found 
that  the  banker  was  a  creditor,  possibly  is  a 
creditor  still,  but  if  so,  he  is,  nine  cases  out  of 
ten,  a  secured  creditor,  while  you  are  not.  The 
banker's  confidence,  after  all,  seems  not  to 
have  been  in  the  party  so  much  as  in  his  col- 
laterals. 

We  find  no  fault  with  the  banks  for  protect- 
ing themselves,  and  this  is  not  brought  against 
them  as  an  arraignment.  Every  creditor  would 
do  the  same.  This  is  brought  up  merely  to 


show  that  because  a  man  is  a  borrower  at  a 
bank,  is  not  necessarily  a  sure  sign  that  he  is  a 
safe  man  for  us  to  trust.  The  banker,  in  the  first 
place,  is  a  privileged  character.  The  borrower 
is  required  to  make  a  minute  statement  of  his  af- 
fairs, and  he  is  prepared  to  give  it  if  he  desires 
a  loan.  In  regard  to  such  statements,  the  banker 
also  enjoys  superior  facilities  for  having  them 
corroborated  and  their  correctness  substanti- 
ated. On  the  other  hand,  the  merchant  who 
seeks  to  place  his  goods  and  secure  a  customer 
in  a  mercantile  way,  finds  it  more  difficult  to 
get  statements;  they  are  not  so  eagerly  furn- 
ished; in  fact,  we  are  liable  to  offend  by  the 
mere  asking  for  them. 

Inquire  of  a  banker  regarding  the  standing  of 
any  business  firm  in  his  locality,  and  his  answer 
will  invariably  be  favorable;  rarely  unfavorable 
or  damaging.  Even  if  the  house  in  question  has 
been  known  to  be  slow  in  meeting  its  obligations 
—"well,  that  does  not  signify;  everybody  is  a 
little  slow,  now."  But  ask  the  banker  to 
discount  the  paper  of  this  same  concern,  with- 
out recourse,  though  with  a  liberal  commission, 
and  it  will  be  a  rare  exception  when  he  is  not 
out  of  funds  just  about  that  time. 

This  simply  proves  the  position  taken,  that 
men  in  business  like  to  say  good  things  of 
each  other,  rather  than  the  reverse.  It  seems 
to  do  us  good,  to  give  us  exceeding  pleasure,  to 
be  able  to  speak  well  of  another,  particularly 


232  WHOM  TO  TKUST. 

when  we  can  do  so  conscientiously  and  by 
reason  of  long  acquaintance  and  from  personal 
knowledge. 

What  has  been  stated  above  pertains  to  the 
references  ordinarily  given  by  one  man  to 
another,  or  by  one  house  to  another,  and  where 
simply  opinions  are  dealt  in  without  serious 
consideration,  as  is  too  often  the  case.  Their 
value,  however,  can  be  greatly  enhanced  and 
made  to  perform  the  very  best  of  offices,  as,  for 
instance,  when  a  customer  gives  us  as  reference 
a  reputable  firm,  and  that  firm,  in  turn,  is  willing 
to  allow  us  access  to  the  man's  ledger  account 
or  give  us. a  transcript  of  the  transactions  with 
him.  This  procedure  furnishes  us  with  valua- 
ble data,  and  with  these  we  can  form  our  own 
and  intelligent  conclusions.  If  the  transactions 
cover  a  long  period  of  years  they  will  furnish 
particularly  good  evidence  of  the  party's  man- 
ner of  doing  business,  and  we  can  readily  deter- 
mine whether  his  account  would  be  a  desirable 
acquisition,  or  not;  for  what  is  satisfactory  to 
one  house  is  not  always  so  to  another.  And  if 
we  are  given  several  references,  and  are  accorded 
similar  privileges  in  each  case,  we  then  com- 
mand information  of  a  very  superior  and  relia- 
ble nature.  Instead  of  mere  opinions,  we  are 
placed  in  possession  of  facts  and  figures  and  an 
established  record,  and  references  which  enable 
us  to  obtain  these  details  are  invaluable  to  the 
credit-man. 


REFERENCES.  233 

The  importance  of  this  class  of  reference  has 
received  recognition  at  the  hands  of  several  lead- 
ing lines  of  trade.  In  the  Wholesale  Clothing 
trade  nearly  all  the  large  houses,  East  and  West, 
have  formed  themselves  into  an  association,  the 
object  of  which  is  ( '  mutual  protection  and  assist- 
ance in  the  matter  of  credits. ' '  A  committee  is 
appointed,  "  clothed  "  with  authority  to  ask  of 
any  of  the  members  transcripts  of  accounts  of 
any  of  their  customers.  Not  only  the  past 
transactions  of  a  dealer  are  thus  made  service- 
able for  our  purpose,  but  his  present  liabilities 
to  that  particular  branch  of  trade  are  ascertain- 
able.  A  retail  clothing  merchant's  sum-total 
of  indebtedness  to  the  trade  is  arrived  at  with 
exactness  by  this  system,  and  if  his  liabilities 
exceed  the  justifiable  "limit  of  credit,"  or,  if 
he  falls  behind  in  his  payments  at  any  time, 
the  fact  can  be  at  once  known  to  every  member 
of  the  association. 

The  same  system  prevails  with  the  Jewelers 
and  the  Furniture  trade;  and  their  separate 
organizations,  for  mutual  protection,  have  at- 
tained a  high  degree  of  usefulness.  A  bureau 
is  created,  and  the  information  required  by 
members  is  obtained  by  an  actuary  appointed 
by  the  bureau.  To  some  extent  other  lines  of 
trade  make  use  of  this  method,  also,  but  it  is 
by  no  means  adopted  universally. 

It  will  be  seen  that  information  received  un- 
der these  conditions  is  valuable;  but  to  create 


234  WHOM  TO  TRTTST. 

the  conditions  first  requires  cooperation  of 
business-houses.  As  a  matter  of  fact,  where 
this  mutual  understanding  and  cooperation 
exist,  references  cease  to  be  of  any  great  im- 
portance, since,  with  or  without  them,  the 
standing  of  a  new  applicant  for  credit  could, 
readily,  and  naturally  would  be  looked  up ;  nor 
would  the  inquiries  be  confined  to  the  house 
specially  referred  to. 

Agencies  have  been  established  and  exist 
which  work  on  this  plan,  but  their  usefulness  is 
necessarily  limited.  Were  the  universal  adop- 
tion of  the  plan  by  all  houses  feasible,  however 
(which  it  is  not,  for  obvious  reasons),  we  might 
look  for  great  benefits  and  greater  safety  to  our 
interests  as  creditors.  The  present  mercantile 
reports,  giving  us  the  character,  ability,  capital, 
etc.,  of  buyers,  in  conjunction  with  reports  from 
the  sellers,  giving  us  the  total  amount  of  lia- 
bilities of  said  buyers  and  their  manner  of  meet- 
ing them,  would  place  us  in  position  to  act  very 
advisedly,  and  we  might  say,  unerringly.  What 
our  debtors  own  is  important  for  us  to  know, 
but  what  they  owe  is  equally  important,  for  a 
knowledge  of  the  assets  only,  in  itself,  is  not  of 
any  particular  value.  It  is  an  exact  knowledge 
of  the  proportion  of  assets  to  liabilities,  in  the 
case  of  our  debtor,  that  must  be  arrived  at. 

There  exists  among  the  trade  at  large  a  com- 
mendable degree  of  courtesy.  Not  only  in 
respect  to  honoring  references,  which,  of  course, 


235 

it  is  a  duty  we  owe  our  customer  when  he  refers 
to  us,  but  among  houses,  generally,  we  find  a 
disposition  to  be  of  service  to  each  other  in  giv- 
ing information,  even  without  the  special  privi- 
lege that  a  reference  confers;  and  this  fraternal 
feeling  can  not  be  developed  too  much. 

That  the  practice  of  giving  and  taking  refer- 
ences saves  much  time  and  perplexity  in  the 
ordinary  course  of  business,  is  undeniable;  but 
in  our  acceptance  and  use  of  them  caution  is 
enjoined  the  same  as  in  accepting  gold  coins— 
we  must  carefully  weigh  and  examine  them. 


236  WHOM   TO   TKUST. 


COMMERCIAL   TRAVELERS. 

To  sell,  and  very  often  to  create  a  market  for, 
the  line  of  goods  lie  represents,  is  the  forte  of 
the  traveling  agent;  but  this,  though  done 
successfully,  may  after  all  be  fraught  with 
disastrous  consequences  to  the  party  furnishing 
the  goods  and  capital.  With  energy  and  ability 
as  salesman,  it  is  of  the  utmost  importance  that 
he  should  combine  with  these  another  qualifi- 
cation, viz. :  judgment  in  making  credits.  The 
old  and  experienced  agent  becomes,  by  constant 
practice  and  contact  with  business-people,  a 
keen  judge  of  human  nature,  of  men's  motives 
and  honesty:  but  all  have  not  reached  that 
point,  and  some,  having  mistaken  their  calling, 
never  will.  Anybody  can  give  away  goods ;  that 
is,  make  sales  without  regard  to  cost  or  profit, 
or  by  selling  to  irresponsible  parties,  and  plenty 
of  these  can  always  be  found. 

A  very  large  proportion  of  the  credits 
throughout  the  country  are  made  directly  by 
agents,  or  based  on  their  opinions,  and  in  a 
large  measure  the  prosperity  of  most  houses  is 
in  their  hands.  All  shades  of  competency(?) 
are  met  with  among  traveling  men  on  this  head ; 
the  difference  between  them  in  the  matter  of 
giving  credit  being  as  great  as  it  is  in  their 
various  other  capacities.  Some  agents  start  out 
with  the  idea  that  their  sole  business  is  to  make 


COMMERCIAL  TRAVELERS.  237 

sales,  and  that  it  is  the  firm's  affair  to  deter- 
mine the  rest.  Of  course,  the  firm  has  the 
privilege  of  accepting  or  rejecting,  bnt  we 
can  not  afford  to  have  men,  under  pay  and  ex- 
pense, waste  their  time  on  parties  whose  orders 
have  to  be  declined.  That  does  not  pay,  and  it 
further  indicates  a  great  lack  of  a  vital  some- 
thing, when  a  representative  shows  such  indif- 
ference to  our  interests.  Coming  in  daily  con- 
tact with  the  trade  in  his  capacity,  he  is  not 
only  the  representative  of  his  firm,  but  he  is  at 
the  moment  the  firm  "de  facto,"  and  not  until 
he  realizes  this,  and  that  on  his  acts  and  judg- 
ment depends  the  welfare  of  his  house,  will  he 
make  himself  a  valuable  man  and  indispensable 
co-worker.  It  is  the  commercial  traveler  in  our 
day  who  transacts  most  of  the  business  of  selling 
and  distributing,  and  the  authority  necessarily 
given  allows  him  all  the  discretionary  power 
and  latitude,  that  his  principals  could  wisely 
exercise  themselves.  And  this  is  necessary,  for 
to  enable  our  representative  to  do  the  best  for 
us,  he  must  have  our  fullest  confidence,  and  be 
allowed  the  utmost  freedom  in  the  use  of  his 
faculties;  and  to  the  great  body  of  agents  all 
this  is  given,  with  mutually  advantageous 
results.  Of  course,  only  those  are  entitled  to 
such  confidential  consideration  whose  past 
services  have  been  marked  by  uniformly  good 
judgment  and  business  capabilities. 
A  eulogy  of  the  traveling  man  is  not  contem- 


238  WHOM   TO   TRUST. 

plated,  but  that  he  forms  the  backbone  and 
sinews  of  our  commercial  growth,  and  that  to 
him  is  due,  in  a  large  measure,  its  rapid  develop- 
ment, must  be  unhesitatingly  admitted.  This 
much  is  necessary  to  say  of  him,  in  a  general 
way,  and  in  order  to  arrive  at  a  proper  appre- 
ciation of  his  vocation,  that  on  him  devolves 
the  executive  part  of  nearly  all  our  commercial 
transactions,  and  the  implicit  trust  reposed  in 
him  is  either  for  good  or  for  harm  to  his  firm, 
according  as  he  is  a  co-worker,  or  not,  in  the 
fullest  sense  of  that  term.  With  respect  to 
determining  a  buyer's  claim  to  credit  and  our 
safety  as  creditors,  the  traveling  agent  has  cer- 
tainly every  opportunity  afforded  him  for  exer- 
cising judgment.  Coming  in  personal  contact 
with  the  buyer,  as  he  necessarily  does,  an  esti- 
mate of  his  ability,  character,  habits,  and 
" make-up"  generally,  is  made  possible  to  a 
practiced  mind.  Being  where  the  business  is 
carried  on,  he*is  also  enabled  to  make  observa- 
tions of  its  management,  the  attention  given  to 
it,  and  whether,  on  the  whole,  the  requirements 
necessary  to  success  are  fulfilled,  or  in  some 
vital  points  overlooked  or  neglected.  Every 
business  carries  to  our  minds  impressions, 
and  even  convictions,  of  its  condition,  whether 
prosperous  or  otherwise,  and  our  intuitive 
senses  become  wonderfully  alert  through  con- 
stant use.  The  same  holds  good  of  men,  and 
our  first  impressions  of  them.  Being,  further- 


COMMERCIAL  TRAVELERS.  239 

more,  in  the  buyer's  place  of  residence,  the 
agent  can  obtain  information  of  a  general  and 
often  of  a  specific  character  from  the  neighbors 
and  townspeople,  all  of  which  will  aid  him 
materially  in  forming  his  opinion. 

All  these  facilities  are  at  the  command  of  the 
agent,  and  should  be  utilized  by  him,  to  the 
end  that  his  recommendations  may  be  judicious, 
or  that  the  information  given  by  him  may  be 
used  to  corroborate  agency  or  other  reports  in 
possession  of  his  principals. 

To  the  man  of  long  service  on  the  road,  advice 
is  not  proffered,  but  to  the  less  experienced,  or 
those  naturally  a  little  remiss  in  the  matter  of 
credits,  as  many  of  them  are,  a  careful  notice 
of  the  suggestions  made  in  the  preceding  chap- 
ters will  redound  largely  to  their  advantage, 
and  be  of  immeasurable  assistance  to  their 
respective  firms. 

One  of  the  shortcomings  of  the  average  agent 
is,  that  he  seldom  gets  actual  figures  as  to  a 
customer's  standing,  even  when  a  special  re- 
quest is  made  to  that  effect.  In  lieu  of  a  state- 
ment he  will  give  it  as  his  opinion  that  the  party 
is  all  right,  without,  however,  being  able  to  give 
any  specific  grounds  for  his  reasoning.  His 
modesty  and  timidity  in  getting  at  facts  are 
only  equaled  by  the  customer's  incompetency 
or  carelessness  in  keeping  his  books  and  affairs. 
In  many  instances  we  know  the  agent  is  unable 
to  get  a  statement,  for  the  reason  that  the  pro- 


240  WHOM  TO   TRUST. 

prietor  himself  can  only  make  a  rough  guess 
at  liis  condition,  and  as  for  details,  classifica- 
tion of  property,  etc.,  he  is  quite  at  sea.  With 
this  class  of  merchants,  if  an  inventory  is  ever 
taken,  the  books  never  show  evidences  of  it; 
they  never  know  their  true  condition  from  a 
monetary  standard,  and  would  be  disheart- 
ened, very  often,  if  they  did  know.  But  even 
in  these  cases  the  agent  can  gather  something, 
if  he  perseveres  in  the  right  direction,  and  if  he 
knows  what  points  of  information  are  of  great- 
est importance  to  obtain. 

It  is  a  great  satisfaction  and  relief  to  be  able 
to  feel  that  an  agent' s  opinion  can  be  relied  on, 
and  that  his  uniform  good  judgment  warrants 
us  in  accepting  his  dictum  in  all  cases,  conflict- 
ing opinions  to  the  contrary  notwithstanding; 
nor  can  it  be  otherwise  than  gratifying  to  him 
to  have  won  respect  for  his  judgment  to  such 
an  extent. 

In  conclusion,  we  would  say,  that  every  trav- 
eling man  should  aim  to  make  his  recommend- 
ations on  credits  unquestioned,  and  his  opinions 
law,  in  the  estimation  of  his  principals. 


INTERVIEWS  VERSUS   REPORTS.  241 


PERSONAL    INTERVIEWS    VERSUS 
REPORTS. 

We  will  undertake  to  show  the  comparative 
advantages  and  disadvantages  of  the  two  meth- 
ods in  determining  credit.  The  time  was  when 
every  merchant  found  it  necessary  to  repair  to 
the  markets  once  a  year,  at  least,  to  buy  his 
spring  or  fall  stock  of  goods.  If  he  was  a 
time  customer,  as  nearly  all  were,  say  fifty 
years  ago,  he  brought  his  cash  with  him  to 
liquidate  previous  purchases,  thus  making  his 
account  good  for  another  credit.  There  was 
personal  contact  and  acquaintance  between 
buyer  and  seller,  but  this  no  longer  exists  to 
any  appreciable  extent.  The  business  of  to-day 
is  done  mainly  through  traveling  agents  and 
by  correspondence,  so  that  no  opportunity  is 
afforded  the  merchant  or  credit-man  of  exer- 
cising his  judgment  of  character  and  of  men. 
Half  a  century  ago  the  New  York  merchant 
prided  himself  on  his  keen,  perceptive  facul- 
ties in  judging  human  nature.  Constant  prac- 
tice undoubtedly  made  them  adepts  in  this 
special  vocation,  and  questions  of  credit  were 
probably  no  more  vexatious  to  them  than  they 
are  to  us.  At  any  rate,  they  were  always  ready 
to  back  their  opinions,  if  favorable,  by  risking 
their  goods. 

Did  they  ever  lose?    The  losses  sustained  by 
la 


242  WHOM  TO  TRUST. 

New  York  merchants,  say  from  1800  to  1850, 
were  enormous,  but  they  also  reaped  large 
profits,  and  neither  the  losses  nor  the  long  time, 
six  to  twelve  months  usually,  prevented  them 
from  making  fortunes. 

Is  a  personal  interview  between  a  would-be 
debtor  and  creditor  an  advantage,  or  detriment, 
in  determining  credit?  It  may  be  either,  accord- 
ing to  circumstances.  Both  methods,  personal 
interviews  and  reports,  have  their  compensating 
features.  The  accomplished  rogue  impresses 
you  favorably  very  often.  He  has  made  it  his 
study  to  give  good  impressions,  and  he  is  as 
well  up  in  his  profession  as  the  merchant — he 
is  often  the  more  expert  of  the  two.  Even 
though  you  have  unfavorable  reports  of  him, 
in  his  case  forewarned  is  not  forearmed  always. 
He  manages,  not  infrequently,  to  brush  away 
any  ill-favored  comments  that  his  neighbors  or 
reporters  may  have  made,  or  that  in  any  way 
preceded  him.  A  personal  interview  gives  him 
that  opportunity,  and  he,  more  than  likely,  is 
not  only  able  to  make  a  satisfactory  explana- 
tion, but  able  to  ingratiate  himself  into  your 
confidence  and  get  your  sympathy  as  well.  Per 
contra,  when  we  have  only  reports  to  govern  us, 
we  have  cold-blooded  facts  to  deal  with;  at 
least  we  accept  them  as  facts,  and  our  cool 
reasoning  faculties  and  judgment  alone  are 
exercised,  and  our  sympathies  are  in  no  wise 
appealed  to  or  endangered. 


INTERVIEWS   VEKSUS    REPORTS.  243 

It  is  not  to  be  denied  that  now  and  then  men 
have  been  badly  used  and  their  reputation 
injured  without  just  cause;  but,  after  all,  these 
cases  are  rare,  and  we  may  with  safety  conclude 
that  when  injurious  reports  are  circulated,  that 
there  is  some  foundation  for  them,  as  a  rule. 
Where  there  is  smoke  there  is  always  some 
fire. 


244  WHOM  TO  TIJUST. 


CHRONIC  BORROWERS. 

There  is  a  class  of  individuals  in  all  mercan- 
tile communities  who  may  be  likened  to  para- 
sitic or  fungus  growths.  Like  the  latter,  they 
subsist  on  their  neighbors.  These  parasites  in 
business,  or  out  of  business,  are  always  asking 
us  for  a  loan  till  to-morrow  or  next  day,  and  no 
sooner  get  one  loan  paid  up  than  they  are 
around  for  another. 

There  is  a  class  of  men  in  business  who  are 
always  borrowing  from  Peter  to  pay  Paul,  and 
they  get  as  many  Peters  on  the  string  as  the 
neighborhood  and  their  circle  of  acquaintances 
will  afford.  They  are  thoroughly  imbued  with 
the  idea  that  business  is  done  for  their  especial 
accommodation,  and  accordingly  press  all  their 
neighbors  and  acquaintances,  however  slight, 
into  service,  keeping  at  the  same  time  close 
watch  on  each  one's  turn.  The  pressing  obli- 
gation is  always  pressing,  and  seems  never  to 
be  discharged;  and  probably  it  never  is,  being 
only  shifted  from  one  day  to  another,  and  from 
one  shoulder  to  another.  There  is  hardly  a 
house  that  does  not  carry  in  its  cash  drawer 
several  I.  O.  U.'s  returnable  to-morrow,  and 
which  represent  to  the  cashier  so  much  cash  in 
balancing  his  accounts.  At  the  end  of  the  year 
more  or  less  of  these  are  always  unredeemed 
and  uncollectible.  The  most  consoling  thing 


CHRONIC   BORROWERS.  245 

about  a  loss  of  this  kind  is  that  when  your  cus- 
tomer suspends  payments  with  you,  he  suspends 
his  visits  to  you  also,  and  in  this  there  is  some 
compensation  at  least. 

But  there  is  a  more  business-like  way  of  get- 
ting at  this.  The  man  of  business  tact,  be- 
longing to  this  same  class,  however,  has  a 
more  genteel  way.  He  wouldn't  do  as  the 
other  fellow  does;  i.  e  ,  ask  for  a  loan.  That 
looks  too  much  like  borrowing.  He  runs  in 
and  asks  you  to  exchange  checks  or  notes  with 
him.  He  knows  whose  checks  are  always  good 
at  the  banks.  You  do  not  catch  him  exchang- 
ing his  check  for  one  that  there  is  any  question* 
about;  it  must  be  gilt-edged  to  be  fit  for  an 
exchange  with  his.  His  check,  you  know  (but 
you  do  not  always),  will  be  all  right  to-morrow 
by  the  time  it  gets  'round  to  the  clearing-house. 
Generally  it  is,  but  there  is  a  time  coming 
when  it  will  not  be. 

Now,  for  a  good  business-man  and  merchant 
who  is  supposed  to  have  good  judgment,  backed 
by  generous  experience,  what  justification  is 
there  for  you  to  engage  in  transactions  of  this 
kind?  None.  There  is  neither  profit,  interest, 
nor  the  usual  banker's  fee  for  exchange  for 
you,  but  on  the  other  hand,  you  take  all  the 
chances  of  a  loss,  and  are  your  own  guarantor. 
Transactions  without  profit,  or  show  of  profit, 
can  not  be  predicated  on  sound  business  prin- 
ciples. A  good  rule  to  go  by  in  these  and  all 


246  WHOM  TO   TRUST. 

cases  is  this:  never  make  a  business  transaction 
by  which,  you  can  not  possibly,  and  do  not 
expect  to  be,  the  gainer  by  the  sum  of  a  fair 
profit  or  interest  on  your  money,  either  directly 
or  indirectly.  Good  business  sense  does  not 
indorse  transactions  of  all  risk  and  no  profit,  or 
even  safe  trades  without  profit. 

Accommodation  paper  and  accommodation 
indorsers  are  not  as  abundant  as  they  were  in 
the  last  generation.  Many  an  old  man  plods 
along  to-day,  poor,  but  wiser  for  his  experience 
in  this  direction.  But  neither  his  experience 
nor  wisdom  have  availed  him  in  later  years. 
That  one  fatal  step,  indorsing,  caused  his  ruin, 
and  his  fate  is  the  more  deplorable  when  we 
consider  the  occasion.  The  present  generation 
of  business-men  do  not  indulge  in  this  danger- 
ous pastime  to  any  extent,  owing,  probably,  to 
the  experience  and  good  advice  of  our  fathers, 
and  safer  methods  of  doing  business  withal. 

There  are  legitimate  borrowers,  and  borrow- 
ing and  lending  make  up  a  large  part  of  our 
daily  commerce.  It  is  not  only  legitimate,  but 
it  is  both  necessary  and  profitable.  The  busi- 
ness-man with  legitimate  business  wants  is 
always  helped.  The  help  seeks  him  quite  as 
much  as  he  seeks  it,  and  transactions  of  this 
class  are  for  mutual  benefit,  and  subserve  the 
highest  commercial  purposes.  But  the  individ- 
ual who  is  made  the  subject  of  this  chapter, 
the  leech  who  fastens  his  suckers  on  his  good- 


CHRONIC   BORROWERS.  247 

natured  and  accommodating  friends,  is  not  in- 
cluded in  the  list  of  legitimate  borrowers.  We 
have  got  him  on  another  list,  and  if  he  should 
never  "show  up  again,"  he  will  never,  no, 
never,  be  missed. 


248  WHOM  TO  TRUST. 


DEBT  VERSUS  INDEPENDENCE. 

Debt  makes  slaves  of  men.  It  robs  them 
of  their  independence,  of  their  manhood,  and 
enslaves  alike  body  and  mind. 

Within  certain  limits,  debt,  like  credit — one 
always  implying  the  other — is  legitimate.  For 
every  dollar  of  credit  there  is  a  co- existent 
debt,  and  both  are  legitimate,  proper,  and  con- 
ducive to  the  highest  development  of  trade  and 
commerce,  as  well  as  individual  benefit.  It  is 
not,  however,  the  legitimate  function  of  debt 
and  credit  that  we  assail  here;  it  is  not  their 
use,  but  their  abuse,  to  which  attention  is 
directed. 

Though  debt  is  the  result  of  a  voluntary 
action  to  commence  with,  it  is  nevertheless 
grinding  and  full  of  servitude,  and  that  of  a 
most  menial  kind.  Millions  are  kept  and  keep 
themselves  in  perpetual  bondage,  and,  consider- 
ing the  ease  with  which  persons  can  get  into 
debt,  it  is  not  to  be  wondered  at.  Even  the 
poor,  copper-skinned  laborer  of  Mexico  knows 
what  it  is  to  hoe  and  dig  all  his  life  to  make 
good  his  arrears  to  his  priest  or  his  employer, 
so  that  his  credit  will  be  good  for  the  next  feast 
day.  It  may  be  a  good  thing  for  the  priest 
and  employer  to  keep  these  poor  idiots  always 
in  debt,  as  it  keeps  them  in  a  state  of  bondage 
and  subjugation,  but  their  mission  on  earth 


DEBT  VERSUS   INDEPENDENCE.  249 

would  seem  to  be  an  aimless  and  unsatisfactory 
one.  To  get  into  debt  is  easy;  to  get  out  is  far 
from  easy.  Man  is  born  free;  free  from  debt, 
at  least.  There  is  no  mechanic' s  lien  or  mort- 
gage on  him  at  his  birth.  If  he  gets  into  debt 
later  on,  it  must  be  of  his  own  volition.  The 
bondage  is,  therefore,  always  of  his  own  mak- 
ing. The  chains  that  bind  him  are  of  his  own 
welding. 

Slavery,  as  an  institution,  no  longer  exists, 
on  this  continent  at  least,  but  Abraham  Lin- 
coln's  "Emancipation  Proclamation"  did  not 
wipe  out  a  species  of  slavery  which  keeps  mill- 
ions in  servitude  still.  No  law  can  reach  con- 
ditions which  people  eagerly  impose  on  them- 
selves. 

The  ancient  Jewish  law  contained  a  clause, 
providing,  that  on  the  day  of  the  Jubilee,  the 
slates  should  be  washed  clean  and  all  debts 
forgiven.  This  provision  would  work  well  now, 
and  in  the  interest  of  a  large  deb  tor  class;  not 
so  much  because  its  debts  would  be  forgiven, 
but  because  creditors  would  be  scarce  and  debts 
could  not  be  so  easily  contracted. 

Debts  are  always  a  burden  on  present  eiforts, 
since  the  fruits  of  toil  go  for  benefits  and  com- 
forts already  enjoyed,  instead  of  to  be  enjoyed. 
Mentally,  t  men  are  kept  on  the  ragged  edge, 
scheming,  conniving,  aye,  conspiring  how  to 
pay  or  not  to  pay  their  honest  debts.  How  to 
pay  them  involves  worry  and  discouragement, 


250  WHOM  TO  TRUST. 

and  this  condition  hampers  the  best  efforts  and 
intentions.  How  not  to  pay  them  incites  the 
baser  tendencies  of  the  mind  and  heart.  The 
man  who  is  burdened  with  debt,  who  is 
under  moral  and  legal  obligations  to  his 
fellow-man  and  unable  to  discharge  them,  has 
ceased  to  be  independent.  His  self-respect,  his 
pride,  and  his  sense  of  honor  (all  men  have 
these,  with  rare  exceptions)  are  made  to  feel  a 
conscious  degradation.  What  crimes,  what 
humiliation,  and  what  hypocrisy  in  all  the 
world' s  history,  from  its  beginning  to  the  pres- 
ent time,  may  not  be  traced  to  man' s  indebted- 
ness to  man!  Debt  and  bondage,  in  this  con- 
nection, signify  about  the  same.  Watch  the 
man  who  is  always  in  debt  beyond  his  ability 
to  pay  (it  requires  no  philosopher' s  lantern  to 
find  him)  and  note  the  difference  between  him 
and  his  neighbor,  who  is  master  of  himself. 
Have  you  ever  had  a  debtor  who  would  walk 
blocks  out  of  his  way  to  avoid  you,  or  would 
"scoot  out"  by  the  back  door  when  he  saw 
you  coming  in  by  the  front?  Possibly  you 
have  been  there  yourself;  though,  perhaps,  your 
case  may  not  have  been  so  well  developed,  only 
the  symptoms,  backed  by  a  strong  inclination, 
being  present.  What  a  power  we  here  behold, 
making  men  slink  into  by-ways  and  alleys; 
making  them  cringe  and  beg  as  for  their  very 
existence!  Think  of  the  subtle  force  there 
capable  of  making  us  such  cowards!  The  man 


DEBT  VERSUS  INDEPENDENCE.  251 

who  would  not  flinch  on  the  battle-field,  whose 
courage  would  be  equal  to  any  danger,  and  who 
would  brave  superior  physical  forces,  is  yet, 
in  his  creditor's  presence,  cowed  and  subdued. 
But  it  is  not  the  creditor's  presence  that  cows 
him,  nor  is  it  any  force  that  he  himself  exerts. 
It  is  the  debtor's  consciousness  of  his  own 
weakness,  loss  of  confidence  in  his  own  recti- 
tude; in  short,  it  is  the  moral  part  of  his  nature 
that  accuses  him.  Self -accusation  is  a  for- 
midable adversary,  than  whom  all  others  are 
insignificant. 

We  have  here  portrayed  the  man  in  debt; 
let  us  now  look  at  the  man  who  is  out  of  debt, 
and  who  purposely  keeps  out.  Whether  he 
possesses  much  or  little  of  this  world's  goods, 
you  will  find  in  him  a  conscious  independence, 
a  manly  self-respect  before  all  men,  and  a 
strong  personality  which  he  has  no  occasion 
to  hide  or  stunt;  and  well  for  every  man  who 
has  learned  to  appreciate  this  state,  either  from 
experience,  observation,  or  principle. 

Within  certain  limits,  debts  are  legitimate 
for  everybody,  in  or  out  of  trade.  As  long  as 
they  are  confined  to  a  point,  and  within  the 
limits  of  our  ability  to  pay  at  the  time  specified, 
they  may  be  safely  and  advantageously  in- 
curred. But  measure  carefully  your  depth  and 
do  not  go  beyond  it  if  you  cherish  and  would 
maintain  freedom  and  independence  of  char-, 
acter. 


252  WHOM  TO  TKTJST. 

It  is  a  favorite  remark  with  a  certain  class 
that,  "The  rich  are  growing  richer  and  the 
poor  poorer."  I  do  not  think  the  poor  are 
growing  any  poorer;  they  simply  stay  poor. 
There  seems  to  be  an  idea  prevalent  among  a 
certain  class,  that  as  one  man  makes  himself 
rich,  others  are  impoverished.  There  is  neither 
logic  nor  reason  in  this.  Instead  of  charging 
this  disparity  to  any  peculiar  or  unfair  condi- 
tions of  society,  it  is  due  only  to  natural  causes. 
Riches  and  accumulations  of  any  kind  have 
a  beginning,  and  the  so-called  poor  man  never 
makes  a  beginning.  The  methods  and  ways  of 
the  man  who  has  accumulated  a  fortune,  are  not 
those  employed  by  the  masses.  There  is  method 
in  accumulating,  and  the  great  majority  of  the 
self-styled  poor  have  none.  Causes  have  their 
effects,  and  these  are  either  good  or  bad,  the 
alternative  resting  largely  on  our  own  will. 

Who  is  it  that  makes  the  rich  richer?  It  is 
the  multitude  of  eager  souls  who  are  always 
getting  trusted,  and  getting  in  debt,  and  pay- 
ing three  prices  for  the  privilege.  A  rich  man 
would  feel  that  he  was  being  robbed  and  ruined 
to  pay  the  prices  that  the  poor  are  paying. 
Take  the  "installment"  plans  and  the  innu- 
merable "easy-payment"  concerns,  and  who 
supports  them?  A  personal  friend  of  the 
writer,  engaged  in  the  business,  has  computed 
that  not  less  than  $4,000,000  annually  are  paid 
by  the  so-called  poor  people  of  this  city  and 


DEBT  VERSUS   INDEPENDENCE.  253 

county,  in  excess  of  cash  prices,  for  the  privi- 
lege of  getting  things  before  they  are  able  to 
pay  for  them.  No  man  has,  or  can  ever  ac- 
quire, a  competency  who  follows  this  plan. 
Earn  first  and  spend  afterward,  is  a  maxim  of 
the  first  importance,  and  one  which  every  man 
must  adopt  if  he  hopes  to  improve  his  finan- 
cial condition. 

It  is  the  abuse,  and  not  the  use  of  debt  and 
credit  that  makes  them  a  curse — to  the  poor, 
especially.  * 

*  The  pauper  poor  are  not  referred  to  here,  but  those  people 
who  work  but  never  get  ahead,  and  who  style  themselves  "  the 
poor  "  in  contradistinction  to  those  who  are  better  off. 


254  WHOM   TO   TKUST. 


COMPROMISES  AND  EXTENSIONS. 

It  was  the  custom  in  the  last  generation  for 
merchants  to  ask  general  extensions  when  they 
became  unable  to  meet  their  obligations;  but 
this  method  of  getting  out  of  financial  difficul- 
ties has  fallen  into  disuse.  In  our  day,  we 
ascertain  what  a  man  can  aiford  to  pay,  and 
settle  with  him  on  a  cash  percentage  of  our 
claims,  if  we  can. 

Conditions  are  constantly  changing,  and 
what  was  advisable  and  practicable  fifty  years 
ago,  does  not  meet  the  case  to-day.  In  the 
first  place,  long  time  was  given,  and  to  tie  up 
capital  and  accounts,  by  carrying  customers 
voluntarily  a  year  or  two,  was  but  the  regular 
order  of  things.  To  give,  then,  one,  two,  or 
three  years'  additional  time,  in  an  emergency, 
with  prospects  of  ultimate  payment,  seemed 
nothing  out  of  the  way.  It  was  in  keeping 
with  the  general  tenor  of  things.  Profits  in 
those  days  were  much  larger  than  now,  and 
this  fact  explains  the  longer  terms  that  mer- 
chants gave  and  were  able  to  give,  and  also 
furnishes  reasons  why  extensions  were  prac- 
ticable and  judicious  then,  and  not  advisa- 
ble now.  In  late  years,  an  extension  has  inva- 
riably meant  a  prolongation  and  aggravation 
of  the  difficulties,  both  to  debtor  and  cred- 
itor. Time  has  ceased  to  be  the  essence  of 


COMPROMISES  AND   EXTENSIONS.  255 

the  thing  needed  in  financial  embarrassments 
or  insolvency.  With  larger  profits  and  ca- 
pable management,  extensions  might  still  be 
advisable;  but  the  larger  profits  are  want, 
ing,  and  the  fact  is,  that  most  concerns  have 
all  they  can  do,  under  fairly  good  condi- 
tions, to  keep  along,  to  say  nothing  of  making 
up  losses  of  the  past.  To  ask  an  extension 
now,  causes  a  concern's  credit  to  be  impaired 
and  practically  lost,  and  it  is  thenceforth  not 
in  position  to  command  the  lowest  prices  or  the 
best  service  in  any  way,  and  a  successful  out- 
come can  not  be  predicted.  It  is,  furthermore, 
loaded  down  with  interest  and  a  large  debt, 
which  is  always  growing  larger;  it  is  harassed 
and  worried,  and,  in  short,  working  at  tremen- 
dous disadvantage  in  every  way.  A  large 
amount  of  valuable  time  is  lost  to  the  concern 
in  attending  to  affairs  of  the  past,  instead  of 
utilizing  it  to  gain  immediate  and  future 
results.  Yesterday's  profits  on  transactions 
have  been  determined,  and  no  amount  of  time 
that  can  be  bestowed  on  past  affairs  will  ever 
make  the  profits  of  by-gone  days  any  larger. 
Your  time  may  be  devoted  advantageously  to 
securing  what  you  have  made,  but  you  can  not 
add  one  iota  to  the  amount,  consequently,  the 
more  time  you  give  to  present  and  future 
operations,  and  the  less  you  are  obliged  to  give 
to  things  past,  the  better  will  be  the  chances  of 
success. 


256  WHOM   TO   TRUST. 

The  last  few  general  extensions  that  come  to 
mind,  proved  lamentable  failures.  Time  only 
made  things  worse,  and  when  the  extended, 
payments  matured,  affairs  were  more  compli- 
cated and  inextricable.  Although,  at  the  outset, 
the  assets  seemed  to  warrant  paying  dollar  for 
dollar  if  time  could  be  gained  to  convert  them, 
many  of  the  shrewder  creditors  signed  the  ex- 
tension reluctantly.  They  were  more  willing  to 
accept  a  cash  offer  of  fifty  cents  on  the  dollar, 
and  the  subsequent  outcome  proved  that  this 
would  have  been  the  best  thing  for  all  inter- 
ested. But  the  concerns  would  not  listen  to 
making  such,  an  offer.  The  property  was  suffi- 
cient to  pay  in  full,  and  their  pride  and  sense 
of  honor  would  not  permit  them  to  compro- 
mise their  indebtedness.  At  the  final  wind-up, 
under  an  assignee,  the  creditors  did  not  realize 
even  fifty  cents,  after  losing  from  one  to  two 
years'  time  in  the  bargain. 

The  code  of  commercial  honor  which  found 
adoption  by  merchants  of  former  generations, 
did  not  countenance  paying  less  than  dollar 
for  dollar,  and  compromises  were  looked  upon 
as  odious  and  dishonest.  But  to  ask  an  exten- 
sion of  creditors,  a.nd  agree  to  pay  as  fast  as 
possible,  was  considered  the  honorable  pro- 
cedure for  embarrassed  and  insolvent  debtors. 
As  a  rule,  the  parties  worked  out  their  indebted- 
ness in  time,  and  this  "  working  out"  maybe 
taken  in  a  literal  sense.  But  of  late  years, 


COMPEOMISES  AND   EXTENSIONS.  257 

when  debtors  find  it  no  longer  possible  to 
meet  their  obligations,  they  make  the  necessary 
move  to  compromise  for  cash,  and  this  kind 
of  settlement  is  generally  acceptable  to  and 
preferred  by  creditors,  provided  the  offer  is 
reasonably  fair,  and  in  keeping  with  the  insol- 
vent's condition. 

When  we  find  merchants,  as  a  rule,  adopting 
certain  uniform  methods,  we  may  be  reasonably 
sure  that  those  methods  have  the  largest  advan- 
tage on  their  side.  We  do  that  which  pays  us 
best,  whether  it  be  to  compromise  with  our 
debtors,  or  anything  else.  That  is  the  true 
principle  of  trade,  and  on  this  principle,  com- 
promises for  cash  have  been  found  preferable  to 
obdurateness  on  the  part  of  creditors.  It  pays 
better  to  take  fifty  cents  cash  to-day  than  to 
take  the  chances  of  getting  one  dollar  five  or  ten 
years  hence,  and  perhaps  not  then.  The  fifty 
cents  will  make  us  fifty  in  five  years  if  employed 
in  business;  on  the  other  hand,  if  you  should 
succeed  in  getting  face  value  for  your  claim  in 
five  years,  you  would  not  be  so  well  off  then, 
after  deducting  the  lawyer's  fees,  loss  of  time  in 
looking  after  it,  etc.;  and  the  proportion  of 
claims  against  bankrupts  that  are  ever  realized 
in  full,  is  quite  small.  The  man  who  has  a 
mass  of  debts  hanging  over  him,  can  still  con- 
tinue in  business,  and  conduct  it  so  as  to  evade 
his  old  creditors. 

This  being  the  experience,  we  say  to  the  in- 

17 


258  WHOM  TO   TEUST. 

solvent  debtor  to-day:  uHow  much  cash  can 
you  offer  us  on  the  dollar  for  our  claim?"  Of 
course  the  creditor  informs  himself  fully  as  to 
the  condition  of  the  bankrupt's  estate,  and  also 
as  to  the  causes  leading  to  the  failure,  and  he 
is  usually  not  slow  in  determining  what  he  will 
take;  nor  does  he  insist  on  the  last  cent  that 
the  estate  can  be  made  to  pay  in  the  bankrupt's 
own  hands.  Creditors  want  a  fair  settlement, 
but  are  willing  to  leave  the  bankrupt  in  con- 
dition to  continue  his  business,  provided  his 
course  has  been  characterized  by  honesty  and 
fair  dealing. 

This  plan,  while  being  fully  as,  if  not  more, 
advantageous  than  any  other  to  the  creditor, 
combines  a  humane  and  Christian  sentiment 
withal. 

There  are  a  few  houses  that  never  compro- 
mise. They  take  either  all  or  nothing.  Some  of 
the  old  Quaker  houses  used  to  refuse  to  sell 
goods  to  dealers  who  had  been  known  at  any 
time  to  settle  for  less  than  dollar  for  dollar. 
Both  these  cases  are  now  rare  exceptions. 

Granting  the  wisdom,  and  good,  practical 
sense  of  our  present  methods  in  dealing  with 
the  unfortunate  debtor,  we  have  next  to  con- 
sider the  proper  course  to  be  pursued  with 
regard  to  the  dishonest  and  fraudulent  debtor. 
To  save  ourselves  annoyance,  litigation,  and 
expense,  we  are  too  much  inclined  to  settle 
with  him  also;  but  in  his  case  we  should  most 


COMPROMISES  AND  EXTENSIONS.  259 

emphatically  draw  the  line.  We  should  do 
this  as  a  measure  of  self-defense  and  protection, 
and  also  as  a  warning  to  those  whom  we  trust, 
that  questionable  transactions  will  not  be  lightly 
passed  over  by  compromising.  If  creditors 
would  adopt  a  uniform  practice  of  refusing  to 
settle  with  dishonest  debtors,  to  the  end  that 
they  will  be  kept  out  of  trade  at  least,  a  salu- 
tary effect  would  be  produced  on  the  commu- 
nity. And  more  than  that,  whenever  fraud  is 
attempted  on  the  creditors,  there  should  be 
unanimity  of  sentiment  and  action  to  bring  the 
guilty  party  to  justice.  Rather  than  accept 
the  small  pittance  usually  offered  by  this  class, 
we  should  be  willing  to  sacrifice  it,  and,  instead, 
prosecute  and  punish  them  to  the  full  extent  of 
the  law. 


260  WHOM  TO   TEUST. 


HISTORY  OF  CREDIT. 

The  oldest  record  we  have  of  credit  is  furn- 
ished by  China.  Banks  of  deposit  and  dis- 
count existed  there  2800  B.  c.,  and  as  the  exis- 
tence of  banks  denotes  a  high  state  of  devel- 
opment of  commerce  and  of  confidence,  we 
may  reason  that  credit,  in  that  deliberate  and 
slowly  progressive  country,  was  ages  in  matur- 
ing before  it  culminated  in  the  establishment 
of  banks.  Eight  hundred  B.  c.  we  find  inter- 
est laws  enacted  for  the  protection  of  borrowers, 
and  500  B.  c.  the  Chinese  Government  issued 
paper  money.  We  find  in  the  earliest  history 
of  Egypt  and  India  credit  transactions  recorded. 
We  read  of  the  Hebrew  women  1500  B.  c.  going 
out  into  the  wilderness  glittering  with  jewelry 
and  trinkets  borrowed  from  their  Egyptian 
neighbors;  nor  is  this  mentioned  as  a  novel 
occurrence. 

History  gives  us  no  clue  as  to  when  and 
where  the  first  actual  credit  transaction  took 
place.  That  this  occurred  at  an  early  period 
when  man  was  still  in  a  semi-civilized  state,  and 
incapable  of  reducing  traditions  and  events  to 
writing,  we  may  readily  take  for  granted.  The 
most  ancient  writers  to  whose  works  we  have 
access,  lead  us  to  conclude,  by  inference  at 
least,  that  credit  was  not  only  contemporaneous 
with  them,  but  even  more  ancient  than  they. 


HISTORY   OF   CREDIT.  261 

Clauses  pertaining  to  contracts,  debt,  mort- 
gage, etc.,  were  contained  in  the  Jewish  law,  as 
well  as  that  of  India  and  China,  and  a  national 
bankruptcy  court  seems  to  have  been  as  much 
a  necessity  then  as  now,  only  they  called  it  by 
different  names.  One  of  the  grand  provisions 
of  the  Jubilee  demanded  that  "the  slate"  be 
washed  clean,  and  all  debts  be  forgiven  at 
stated  intervals. 

In  Athens  and  other  commercial  centers  of 
Greece,  the  credit  system  was  not  unknown. 
The  rights  of  capitalists  were  strictly  guarded, 
though  they  were  heavily  taxed.  Money  was 
obtainable,  and  money-lenders  were  numerous, 
but  interest  was  high.  Indorsing  for  one 
another  seems  to  have  been  customary  then  as 
in  modern  times,  for  we  find  laws  pertaining 
to  the  liability  of  the  indorser.  They  had 
marine  insurance  and  probably  fire  insurance 
companies.  Cargoes  were  insured,  and  vessels 
were  burned  or  shipwrecked  for  the  sake  of  the 
insurance  money  then,  as  ever  since. 

In  Rome,  also,  the  credit  system  flourished. 
There  were  many  rich  people,  composed  mainly 
of  the  nobles,  who  never  turned  a  deaf  ear  to 
the  poor  applicant — if  he  had  good  security. 
But  even  without  this,  the  noble  lord  was  tol- 
erably safe,  since  he  had  not  only  a  hand  in 
making  the  laws,  but  the  right  of  enforcing 
them  to  suit  his  lordship's  own  ideas  of  justice. 
We  are  told  that i '  torture,  slavery,  and  impris- 


WHOM  TO  TRUST. 

onment  with  hard  labor,  in  a  private  jail  some 
two  stories  beneath  the  banquet  hall  of  the 
illustrious  usurer,  were  the  lot  of  all  delin- 
quents, and  well  for  them  if  they  ever  got  out 
of  his  clutches  again."  With  prospects  like 
these  staring  one  in  the  face,  it  must  have 
required  considerable  nerve  to  become  a  bor- 
rower. 

In  feudal  Europe,  neither  credit  nor  com- 
merce attained  to  any  growth.  For  many  cen- 
turies there  was  complete  stagnation  in  the 
sciences,  arts,  and  commerce.  That  period  in 
the  history  of  the  Caucasian  race  was  unset- 
tled and  full  of  turbulence.  The  only  law  that 
prevailed  was  that  of  "might."  We  read  of 
credit  being  given,  but  it  lacked  the  essence  of 
a  free-will  transaction.  Often  the  lender  was 
not  a  willing  party  to  the  transaction,  but  the 
alternative  was  not  to  be  thought  of.  It  was 
simply  a  choice  as  between  two  evils.  Practi- 
cally, borrowing  was  disguised  robbery.  Rich 
Jews,  wealthy  provinces  and  cities,  were  alike 
called  upon  for  loans  by  the  feudal  lords,  and 
it  was  either  to  grant  the  request  voluntarily 
or  be  compelled  to  do  so  at  the  point  of  the 
sword,  or  something  worse.  Sometimes  the 
loans  were  repaid  in  a  left-handed  manner  by 
granting  the  creditor  special  privileges,  but 
they  were  rarely  paid .  back  in  money.  A  de- 
mand for  the  return  of  a  loan  would  have  been 
more  likely  to  meet  with  dry  blows  from  the 


HISTORY  OF  CREDIT.  263 

princely  borrower  and  his  minions,  than  with 
payment  in  hard  cash. 

In  the  Europe  of  the  Middle  Ages,  we  find 
the  first  banks  established  by  the  rich  trading 
centers  of  Genoa,  Venice,  Hamburg,  and  Bre- 
men. From  the  time  of  the  establishment  of 
these,  we  may  date  the  growth  of  commerce 
and  credit.  As  banks  can  not  flourish  in  com- 
munities where  confidence  does  not  exist,  we 
must  assume  that  the  conditions  in  Europe  had 
undergone  a  change  for  the  better.  But  we 
must  not  infer  that  the  functions  of  banks  were 
the  same  then  as  now.  They  accommodated 
the  public  mainly  in  one  way,  namely,  as  reposi- 
tories of  gold  and  silver,  plate,  jewels,  valuable 
documents  belonging  to  the  wealthy  few, 
and  to  the  State  or  smaller  municipalities. 
That  these  deposits  represented  enormous  value 
must  be  allowed  from  the  fact  that,  at  various 
times,  the  cupidity  of  revolutionary  armies  in 
adjacent  States  was  aroused  and  frequent 
assaults  were  made  on  Bern,  Genoa,  Venice, 
and  Amsterdam  for  the  purpose  of  laying  hands 
on  the  vast  treasures  held  by  the  banks  of 
those  cities. 

Holland  in  the  seventeenth  century  had 
better  credit  than  France  or  England,  and,  up 
to  the  reign  of  Queen  Anne,  she  continued  to 
be  the  first  commercial  nation.  After  that, 
England  was  in  the  ascendency,  and  has  main- 
tained it  ever  since,  and  its  credit,  at  home  and 


264  WHOM  TO  T.KTJST. 

abroad,  from  that  time  to  this,  has  always  been 
the  wonder  and  amazement  of  other  nations. 
We  are  told  that  "the  Persian  embassadors 
of  hardly  more  than  a  century  ago,  could  never 
comprehend  the  national  debt  of  Great  Britain; 
they  talked  much  of  it,  they  questioned  their 
English  friends,  and  sent  home  voluminous 
dispatches  on  the  subject  of  the  fabulous  lia- 
bility of  the  Britons.  But  when  they  were 
shown  the  park  of  artillery  at  Woolwich,  and 
heard  the  roar  of  ordnance  on  a  field  day,  they 
refused  to  hear  further  explanation  of  the  debt, 
declaring  that  the  'British  Government  had 
cannon  and  gunpowder  enough  to  blow  debt  and 
creditors  into  infinite  space,'  and  that,  under 
these  favorable  circumstances,  no  demand  for 
payment  was  possible." 

They  solved  the  problem  in  precisely  the 
same  manner  that  the  despots  of  old  would 
have  done.  Not  even  the  legal  form  of  repu- 
diation of  interest  or  principal  would  have  been 
deemed  necessary  by  them. 

We  are  shown  that  a  high  state  of  credit 
marks  a  corresponding  degree  of  civilization. 
Savages  and  the  ruder  tribes  of  uncivilized 
countries  hardly  know  what  credit  means,  and 
have  no  word  even  expressive  of  its  meaning. 
Only  where  probity  and  ownership  of  property 
exists,  and  where  rightful  possession  is  defined 
by  a  higher  law  than  that  of  the  individual 
standard,  can  credit  flourish.  In  the  matter  of 


HISTOBY  OP  CREDIT  265 

property  and  ownership,  the  savage  is  like  a 
child  ;  everything  within  his  reach  he  appropri- 
ates, and  neither  scruples  nor  asks  questions.  Of 
what  we  term  honor,  the  savage  has  none,  and 
truth  he  is  a  stranger  to — with  strangers  par- 
ticularly. 

In  all  civilized  communities  we  find  credit, 
but  its  use  is  found  to  vary  according  to  the 
intelligence  and  education  of  the  people. 
Credit  is  given  liberally  by  the  Chinese,  we  are 
told.  They  are  thrifty  in  their  way,  and  under- 
stand the  accumulating  properties  of  little 
grains  of  sand  better  than  any  other  people. 
They  are  also  the  greatest  swindlers,  in  a  small 
way,  in  the  world  ;  though  in  their  commercial 
transactions  with  one  another,  they  are  said  to 
be  very  honest.  No  bankrupt  laws  exist,  but 
debtors  are  liable  to  corporal  punishment.  Not 
paying  one' s  debts  is  a  disgrace  in  China,  and 
the  debtor  is  practically  "drummed  out"  of 
business.  The  whole  nation  "settles  up"  at 
New  Year's  Day,  which  comes  usually  in  Feb- 
ruary. It  is  said  that  China  never  had  a  panic, 
and  that  in  times  of  famine  or  failure  of  crops, 
the  Government  furnishes  liberal  aid  to  the 
sufferers,  although  recent  events  do  not  corrob- 
orate this  statement. 

In  all  European  countries  we  find  credit,  but 
its  use  is  more  or  less  restricted  in  different 
localities.  In  Italy  nearly  everything  is  done 
for  cash ;  the  same  in  Spain  ;  on  the  other  hand, 


266  WHOM  TO  TRUST. 

in  Russia  and  Turkey  twelve  months  is  usually 
given,  even  on  articles  of  prime  necessity. 
The  difference  in  the  customs  of  these  nations 
is  probably  owing  to  climatic  conditions  and 
occupations.  In  Western  Europe,  we  find  from 
three  to  six  months'  credit  rulable. 

Credit-giving  is  manifestly  one  of  man's 
inventions,  for  we  can  not  find  that  Nature  ever 
established  the  custom.  Nature  gives  us  no 
credit.  We  must  work  first  and  eat  afterward, 
and  she  is  inexorable  in  her  strict  adherence  to 
these  terms.  Man,  however,  is  more  pliant  and 
accommodating  in  his  methods,  and  is  subject 
to  a  corresponding  degree  of  disappointment 
and  failure  in  his  affairs.  In  dealing  with 
Nature,  we  must  first  till  the  soil  and  sow  the 
seed  before  we  can  eat  of  the  abundance  of  the 
golden  grain.  Without  this,  the  fields  can  not 
be  persuaded  to  yield  the  harvest.  The  hunter 
must  trudge  to  secure  the  game  ;  even  the  wild 
fruit  and  the  shell  fish  make  toil  necessary  for 
their  obtainment.  Thus  we  see  that  Nature  is 
firm  and  holds  us  steadily  to  fixed  conditions, 
and  it  is  no  doubt  well  that  she  does  so. 

"Credit  has  an  aptitude  for  good  and  evil;  it 
can  be  benign  or  malignant  in  turn,  but  its  ex- 
istence is  a  sure  mark  of  progress  in  the  social 
scale.  How  it  slowly  ripened,  bearing  fruit  in 
the  shape  of  stocks,  bonds,  bank  and  govern- 
ment notes,  loans,  and  mercantile  credits  would 
be  difficult  to  trace.  We  exchange  our  earn- 


HISTORY  OF  CREDIT.  £67 

ings  for  the  flimsy  bits  of  paper  with  a  trust 
that  is  most  wonderful,  and  the  wonder  is  that 
credulity  does  not  of tener  outstrip  performance. 
But  this  modern  credit  is  the  creation  of  our 
own  confidence,  withal,  and  in  the  course  of  its 
development  has  struck  deep  roots  in  the  very 
heart  of  the  State." 

"  Credit  is  two-faced  and  may  be  employed  to 
our  benefit  or  injury  according  as  its  potent  aid 
is  invoked.  With  a  good  foundation  for  our 
business  to  stand  on,  backed  by  brains  and 
energy,  it  may  be  used  advantageously  within 
proper  limits.  The  danger  lies  in  too  great 
reliance  on  its  good  offices.  It  is  often  looked 
upon  as  an  inexhaustible  quarry,  ever  ready  to 
yield  to  our  wants,  but  apt  to  fail  us  when 
most  needed." 

Credit,  like  fire,  when  carefully  handled  is 
of  incalculable  service. 


268  WHOM  TO  TEUST. 


OUR  CREDIT  SYSTEM. 

Some  one  has  aptly  said  :  "  Commerce  is  the 
offspring  and  at  the  same  time  the  support  of 
civilization."  Wherever  we  find  the  one,  we 
always  find  the  other.  Commerce  came  with 
the  growth  of  civilization,  the  latter  being  the 
cause,  and  the  former  the  natural  result.  This 
we  must  accept  as  a  fact,  although  to  day  we 
might  almost  be  inclined  to  believe  that  com- 
merce was  the  cause,  and  civilization  the 
effect. 

But  commerce  does  not  stand  as  the  agent  or 
representative  of  civilization  in  doing  this  grand 
work  of  civilizing  and  educating.  While  she 
performs  this  work,  and  does  it  well,  it  is  for- 
eign to  her  real  purpose  and  apart  from  her 
mission.  The  purpose  of  commerce  is  not  of  a 
philanthropic  nature;  it  has  no  such  motive. 
Self-interest  and  the  hope  of  personal  aggran- 
dizement are  its  incentives,  and  these  furnish 
the  motive-power  for  its  penetrating  and  aggres- 
sive tendencies. 

Thus  we  see  that  civilization  and  commerce 
are  so  closely  allied  that  it  is  difficult  to  deter- 
mine which  one  of  the  two  leads  or  follows. 
When  we  consider  the  relationship  of  com- 
merce and  credit,  we  find  the  line  of  demark- 
ation  even  more  indistinct.  They  are  of  simul- 
taneous growth,  and  the  existence  of  one 


OUK    CREDIT  SYSTEM.  269 

always  implies,   and    is  indispensable  to  the 
other. 

It  might  be  argued  that  commerce  could 
exist  without  credit.  Possibly,  on  a  very 
limited  scale.  Every  commercial  or  mercan- 
tile transaction  is  based  on  credit  at  some 
point.  Your  confidence  causes  you  to  rely  on 
statements  made,  and  you  credit  these  state- 
ments. You  may  buy  a  barrel  of  St.  Louis  flour, 
and  pay  the  cash  for  it,  but  there  is  a  credit 
implied,  nevertheless.  What  makes  you  pay 
the  cash  for  the  flour  before  you  have  actually 
examined  the  contents  of  the  barrel,  weighed 
it  on  your  own  scales,  and  satisfied  yourself 
from  other  sources  that  the  flour  was  made  in 
St.  Louis,  and  not  in  Minneapolis,  as  claimed? 
You  see,  even  in  our  cash  transactions,  credit 
is  given.  In  the  above  case  the  buyer  gives  all 
the  credit  and  takes  all  the  chances,  whereas, 
in  the  ordinary  credit  transactions,  the  flour 
being  sold  on  time,  both  buyer  and  seller  give 
credit.  They  have  mutual  confidence  in  one 
another  that  each  will  do  as  he  agrees.  In  the 
earliest  stages  of  civilization,  commerce  had  no 
existence,  and  credit  or  its  synonym,  mutual 
confidence,  was  unknown.  Exchanges  were 
made  of  one  commodity  for  another,  but  traffic 
of  this  kind  is  called  barter,  and  does  not  reach 
the  dignity  of  being  called  commerce  or  trade. 
The  North  American  trapper  takes  beads, 
showy  trinkets,  and  gewgaws  with  him  when 


270  WHOM   TO   TRUST. 

he  visits  the  wild  tribes  of  the  West  and  North, 
and  these  he  exchanges  with  the  Indians  for 
their  furs.  Both  get  what  they  bargained  for 
on  the  spot,  and  neither  credit  nor  confidence 
enters  into  the  transaction. 

But  to  follow  the  course  and  growth  of  com- 
merce and  credit  from  its  incipiency  and  from 
a  stage  of  barter,  when  honor  and  mutual  con- 
fidence were  still  undeveloped  qualities  in  man, 
to  that  of  our  present  state  of  commerce  and 
credit  and  universal  confidence,  would  lead  us 
outside  the  domain  of  a  practical  business  treat- 
ise, and  open  up  a  field  more  in  keeping  with 
the  labors  of  the  historian.  Man's  means  of 
support  must  necessarily  at  all  times  have  been 
an  all-important  element  in  his  condition.  His 
education,  progress,  and  development  are  so 
dependent  on  and  so  closely  interwoven  with 
the  means  afforded  him  for  support,  that  com- 
merce, which  for  ages  has  furnished  that  means 
to  a  greater  or  lesser  degree  in  the  different 
epochs  of  the  world's  history,  must  have 
exerted  an  all-pervading  influence  and  power- 
ful stimulus  on  the  welfare  and  possibilities  of 
nations  and  of  men. 

In  no  country  is  credit  so  cheap  or  so  high 
as  in  the  United  States.  It  is  said  to  be  cheap 
because  it  is  so  easily  obtained,  or  high,  because 
capital  goes  out  freely  and  is  willing  to  take 
its  chances  on  all  manner  of  enterprises,  so  long 
as  they  offer  prospective  returns  for  the  invest- 


OUR   CREDIT   SYSTEM.  271 

irient.  It  is  the  exception  here  when  a  man  is 
denied  credit  for  any  ordinary  or  even  extraor- 
dinary business  wants. 

The  marvelous  progress  and  development  of 
this  country  is  the  wonder  of  the  world,  and 
our  own  amazement  finds  no  limit;  but  as  a 
single  factor  in  helping  to  bring  about  this  con- 
dition," our  credit  system,  extending  as  it  does 
into  every  nook  and  corner  of  this  great  con- 
tinent and  beyond  it,  is  no  less  worthy  of 
remark,  and  commands  the  admiration  of  those 
capable  of  a  just  conception  of  its  importance. 
Why  this  willingness  and  eagerness  of  every- 
body to  trust  everybody  should  exhibit  itself 
more  in  this  country  than  in  others,  is  not  to  be 
reasoned  out  on  the  assertion  made  sometimes 
that  credit  is  highest  where  population  is 
densest,  and  vice  versa.  On  that  theory  all 
European  countries  would  enjoy  much  higher 
credit  than  we,  which  is  not,  however,  sub- 
stantiated by  the  facts.  If  density  of  popula- 
tion caused  credit  to  be  more  easily  obtained, 
it  would  follow  that  credit  ought  to  be  dis- 
pensed with  a  more  liberal  hand  to-day  than  it 
was  fifty  years  ago,  which,  also,  is  not  the 
case.  In  fact,  the  long-time  credits  of  that 
period,  when  six  and  twelve  months  were  reg- 
ularly given  to  traders  in  the  far  West  and 
South,  with  hardly  any  communication  except 
when  buyers  visited  the  markets,  required 
rather  greater  confidence  than  is  exhibited,  or 


272  WHOM  TO  TRUST. 

would  be  considered  warrantable,  to-day.  The 
curtailment  of  the  time  in  late  years,  we  will 
admit  not  to  be  due  to  a  lesser  degree  of  con- 
fidence, but  to  smaller  margins,  which  has  neces- 
sitated turning  capital  over  oftener  than  once 
or  twice  a  year,  and  also  to  the  fact  that  the 
trading  community  has  more  capital  at  com- 
mand. But  could  confidence  possibly  reach  a 
higher  limit  than  when  the  New  York  mer- 
chants, previous  to  the  era  of  railroads  and 
the  telegraph,  trusted  their  goods  out  to  the 
far  distant  Territories,  with  only  stage-coach 
facilities  for  reaching  them  and  where  the  debtor 
was  known  to  have  all  the  advantages  on  his 
side?  It  is  evident  that  we  must  look  for  the 
cause  of  our  wonderful  credit  system  in  other 
directions,  and  not  attribute  it  to  density  of 
population. 

Credit  flourishes  in  proportion  as  people 
have  confidence  in  each  other;  but  confidence 
does  not  come  of  itself.  What  creates  it  with 
us,  is,  that  greater  opportunity  is  afforded 
for  making  money,  and  this,  joined  to  our  nat- 
ural ability  as  traders  and  aptitude  in  improv- 
ing opportunites,  is  what  gives  us  faith  in  each 
other.  Every  man  with  moderate  ability  can 
make  money  here;  he  can  hold  his  own,  at 
least,  and  support  his  family  out  of  his  busi- 
ness, and  there  is  reasonable  expectation  of 
success  in  every  legitimate  undertaking.  Our 
inherent  individual  honesty  we  will  rate  no 


OUR  CREDIT  SYSTEM.  273 

higher  than  that  of  other  nations,  and  placing 
all  nations  on  a  par  on  this  score,  we  have  this 
additional  advantage  over  all,  that  money  is, 
and  can  De,  more  easily  made  here,  and  this  is 
an  all  important  consideration  in  the  minds  of 
those  who  have  money  or  goods  to  let  out. 
If  a  man  were  known  to  be  ever  so  honest, 
credit  would  not  be  extended  to  him  if  his 
chances  of  success  seemed  doubtful.  We 
are  only  .willing  to  risk  our  capital  when  we 
find  a  reasonable  assurance  that  the  borrower 
or  debtor  will  be  able  to  repay  it  at  the 
appointed  time,  with  interest  or  profit.  This 
assurance  is  felt  here  to  a  much  greater  degree 
than  in  other  countries,  and  has  been  built  up 
by  the  prestige  of  past  experience. 

We  are  recognized  the  world  over  as  a  nation 
of  traders.  To  deserve  this  encomium  and  to 
build  up  this  reputation  for  ourselves,  has  set- 
tled us  in  the  conviction  that  we  possess  supe- 
rior advantages,  as  well  as  talents,  in  our  meth- 
ods of  money  making.  These  are  the  elements 
that  contribute  to  the  development  of  our  credit 
system,  and  capital,  consisting  either  of  money 
or  goods,  feels  not  only  safe  in  the  return  of 
the  principal,  but  has  every  assurance  also  of 
interest  or  profit.  This  furnishes  the  funda- 
mental principles  on  which  credit  is  estab- 
lished, nor  will  it  flourish  under  adverse  con- 
ditions. 

In  countries  where  we  find  a  high  rate  of  inter- 
is 


274  WHOM   TO   TRUST. 

est  rulable,  and  where  5  per  cent,  per  month  is 
demanded  for  the  use  of  capital  on  the  most 
available  securities,  we  shall  always  find  inse- 
curity of  property  and  a  doubtful  feeling  as  to 
the  ability  of  the  borrower  to  return  the  loan  at 
the  appointed  time.  Capital,  on  the  other  hand, 
with  us  is  more  productive  at  from  5  to  ?  per 
cent,  per  annum,  it  being  constantly  kept  earn- 
ing, and  at  this  rate  is  always  loanable  with  the 
utmost  security  and  without  great  risk  or  anx- 
iety to  the  lender.  The  larger  the  risk  that  men 
take,  the  larger  will  be  the  charges  exacted. 
The  hope  of  large  gain  is  always  attended 
with  proportionately  great  risk.  "High  inter- 
est means  bad  security,"  is  an  old  maxim. 

The  credit  system  may  be  said  to  have  been 
a  growth  of  necessity,  like  other  systems  and 
conditions.  The  growth  of  civilization  and 
industry  made  it  indispensable,  and  it  kept  on 
growing  with  the  progress  of  commercial  punc- 
tuality and  integrity,  and  wherever  it  finds  the 
aliment  of  its  growth,  it  flourishes  and  can  not 
be  destroyed.  Long  before  it  attained  its  pres- 
ent magnitude  and  extension,  it  had  sent  out 
many  vigorous  shoots  in  various  countries.  In 
a  work  by  Stephen  Colwell  we  find  mention 
made  of  the  fairs,  so  prevalent  in  Europe  in  the 
Middle  Ages,  some  of  which  continue  even 
down  to  our  time,  and  that  payments  at  these 
fairs  were  made,  to  a  large  extent,  by  setting 
off  debts  against  debts.  "  Men  learned  to  pay 


OUR   CREDIT   SYSTEM.  275 

their  debts  with  their  credits,  and  this  mode  of 
payment  only  disappeared  as  the  progress  of 
the  credit  system  and  the  growth  of  cities 
absorbed  both  the  business  and  the  payment 
of  the  fairs."  Every  debt  implying  a  credit, 
the  fact  was  revealed  that  no  one  could  better 
employ  his  credit  than  in  paying  his  debts. 
This  required  no  money,  and  was,  therefore, 
not  only  economical,  but  free  from  innumerable 
risks  and  trouble  inseparably  connected  with 
payments  in  money. 

Our  clearing  houses  and  exchanges,  our  bank- 
ing business,  and  our  commercial  and  financial 
transactions,  are  all  conducted  on  precisely  the 
same  principle.  Jones  borrows  money  at  the 
bank  and  the  amount  is  placed  to  his  credit.  He 
owes  Smith,  and  gives  him  a  check  on  his  bank. 
Smith  deposits  it  (in  the  same  bank  perhaps), 
and  the  check  is  credited  to  Smith  and  charged 
to  Jones.  No  money,  or  actual  cash,  is  handled 
in  the  transaction.  Credits  are  thus  used  to 
pay  debts;  but  before  this  function  of  credit 
can  be  utilized  to  the  uttermost,  as  we  see  it 
to-day, ,  a  fully-developed  credit  system  and 
mutual  confidence  are  absolutely  necessary. 

All  our  large  enterprises,  our  large  corpora- 
tions, and  undertakings  of  both  a  private  and 
public  character,  are  due  to,  and  have  been 
possible  only  through,  the  medium  of  our  credit 
system.  The  capital  to  further  and  operate 
these  enterprises  is  contributed,  in  a  large 


276  WHOM   TO   TllUST. 

measure,  by  the  many,  although  a  few  large 
capitalists  generally  take  the  lead.  But  both 
small  and  large  investors  have  confidence  and 
are  willing  and  eager  to  intrust  their  accu- 
mulations to  the  management  of  others,  in 
the  expectation  of  fair  returns.  To  this  confi- 
dence, to  this  facility  for  obtaining  credit,  it  is 
due  that  companies  can  be  founded  for  pur-, 
poses  the  most  useful  and  beneficial.  It  is  not 
the  individual  ownership  of  money,  but  credit, 
that  ''bridges  the  morass,  spans  the  land  with 
iron  rails  and  the  sea  with  copper  wires,  and  is 
building,  spinning,  making,  and  gathering  all 
that  can  be  built,  spun,  made,  or  gathered." 

The  banking  business  of  a  country  furnishes 
the  best  index  to  its  credit,  both  national  and 
individual,  and  to  the  confidence  existing 
among  its  people  in  one  another.  To  foreign- 
ers our  methods  of  banking  seem  loose  and 
insecure,  and  to  an  English  or  Continental 
banker,  accustomed  to  the  precautions  used  in 
his  country,  we  appear,  at  first  glance,  most  reck- 
less. American  bankers  trust  out  their  funds 
with  the  same  freedom  as  does  the  merchant 
his  goods,  and  not  unfrequently  loans  for  busi- 
ness uses  are  made  solely  on  the  borrower's 
individual  responsibility  and  reputation,  with- 
out other  security  or  guarantee  of  second  or 
third  parties  as  indorsers. 

Every  bank  customer,  of  any  standing  what- 
ever, being  thus  readily  and  cheerfully  accom- 


OUR  CREDIT  SYSTEM.  277 

modated  with  loans  to  an  amount  within  keep- 
ing with  his  capital  and  business,  the  cus- 
tomer, if  he  be  a  merchant  or  manufacturer, 
can  increase  his  business  to  the  extent  of  his 
ability  to  become  a  borrower,  and  in  this  wise 
trade  is  greatly  facilitated  and  the  country 
benefited.  What  he  trusts  out  on  the  one 
hand,  beyond  the  limit  of  his  own  capital,  he 
borrows  on  the  other  hand  from  the  banks,  and 
though  he  pays  6  per  cent,  per  annum  for  the 
money,  he  is  the  gainer  by  the  difference  be- 
tween the  interest  paid  and  the  profits  secured. 
And  the  large  accumulation  of  our  loanable 
funds  always  finds  a  ready  demand  from  this 
source.  Bankers  are  as  eager  to  find  borrowers 
as  borrowers  are  to  find  bankers.  In  times  of 
panic  and  depression  the  banker  is  forced, 
much  against  his  will  and  inclination,  to  call 
in  and  reduce  his  loans  as  a  matter  of  safety. 
When  money  commands  the  highest  rate  of 
interest,  which  is  evidence  of  loss  or  want  of 
confidence,  bankers  find  it  necessary  to  be  most 
conservative,  and  dare  not  avail  themselves  of 
the  opportunity  of  making  the  larger  gains. 
Although  the  rate  of  interest  is  higher,  they 
earn  less  money,  as  only  a  small  proportion  of 
the  capital  and  deposits  can  be  loaned  out  with 
safety.  In  ordinary  times,  on  the  contrary,  the 
minimum  reserve  only  need  be  kept  on  hand, 
thus  allowing  a  much  larger  proportion  of  the 
bank' s  funds  and  deposits  to  be  used.  Whether 


278  WHOM  TO  TRUST. 

banks  feel  called  upon  to  keep  the  maxi- 
mum or  minimum  reserve,  whereby  a  stringent 
or  an  easy  money  market  is  largely  caused,  is 
simply  an  evidence  of  favorable  or  unfavorable 
conditions.  In  times  of  panic,  banks  get  the 
credit  of  making  ' '  confusion  worse  confounded ' ' 
by  calling  in  their  loans  and  refusing  new 
ones;  but  banks  are  really  responsible  for  this 
in  but  a  small  measure.  It  is  the  depositors, 
composed  of  people  who  are  not  actively 'en- 
gaged in  business,  and  who  easily  take  fright, 
who  cause  the  stringency  by  loss  of  confidence 
in  the  safety  of  the  banks  and  who  consequently 
withdraw  their  money  for  safe-keeping  in  an 
old  stocking.  The  withdrawal  from  circulation, 
and  from  the  loanable  funds,  of  the  aggregate 
of  all  these  small  deposits,  is  a  matter  beyond 
the  control  of  the  banks,  and  loans  and  depos- 
its, in  the  hands  of  others,  not  bankers,  are 
likewise  subject  to  be  called  in  from  the  same 
general  cause. 

High  credit  is  indicative  of  universal  confi- 
dence, and  increases  the  productiveness  of  a 
country.  This  confidence  is  what  keeps  the 
savings  and  earnings  of  the  people  in  circula- 
tion, and  whoever  accumulates  a  savings  fund, 
be  it  ever  so  small,  deposits  or  invests  it 
where  it  will  be  used  in  producing  and  earning, 
either  directly  or  indirectly.  Outside  of  the 
pocket  money  of  the  people,  money  is  not  kept 
locked  up  or  hidden  away  as  it  used  to  be,  ex- 


OUE  CREDIT   SYSTEM.  279 

cept  during  times  of  financial  distress.  In  this 
generation,  and  in  all  commercial  countries, 
money  is  esteemed  more  for  its  earning  capacity 
than  for  the  thing  itself ;  in  other  words,  a 
larger  proportion  of  the  people' s  money  assumes 
the  character  of  capital,  and  the  difference  be- 
tween the  two  terms  is,  that  capital  is  money 
(or  wealth)  employed  in  producing  and  earn- 
ing, while  money,  not  productively  employed, 
is  not  capital. 

The  miser  is  a  relic  of  a  period  when  hoard- 
ing and  hiding  money  and  valuables  was  neces- 
sary for  their  safe-keeping,  and  when  a  con- 
dition of  universal  confidence  of  man  in  man 
had  no  existence.  The  miser  has  no  confidence 
in  anybody  or  anything,  except  the  glittering 
gold  and  silver  coins  themselves,  though  lat- 
terly we  have  read  of  finding  greenbacks  actu- 
ally stowed  away  among  the  effects  of  defunct 
misers  ;  but  such  a  stretch  of  confidence  as  this, 
in  even  "Uncle  Sam's  scrip,"  is  evidence, 
surely,  of  miserly  degeneracy,  and  of  a  weak- 
ened mind. 

The  money  hoarded  and  hidden  by  the  miser 
is  taken  out  of  circulation  and  ceases  to  be  pro- 
ductive. In  this  light,  a  community  of  misers 
and  a  community  of  barbarians  or  Hottentots, 
by  neither  of  whom  mutual  confidence  is  un- 
derstood, would  produce  about  the  same  rela- 
tive results  and  conditions,  inasmuch  as 
neither  community  would  contribute  to  pro- 


280  WHOM  TO  TRUST. 

ductiveness    or   development    of    natural   re- 
sources. 

The  difference  between  this  condition,  with- 
out credit,  and  our  actual  condition,  with  the 
function  of  credit  fully  developed,  is  simply 
the  difference  between  a  condition  of  ignorance 
and  barbarism  and  that  of  the  highest  type  of 
civilization  and  development  of  the  human 
race. 


CEEDIT— CAPITAL  AND   LABOR.  281 


CREDIT:  ITS  RELATION  TO  CAPITAL 
AND  LABOR. 

The  natural  and  logical  order  in  which  these 
great  factors  in  our  industrial  system  range 
themselves,  is  labor,  capital,  and  credit. 

Labor  is  the  source  whence  all  wealth  is 
derived.  It  is  the  prime  factor,  and  of  neces- 
sity precedes  capital  and  credit;  for  without  its 
performance,  neither  the  one  nor  the  other 
could  have  existence.  Wealth  represents  the 
surplus  of  labor  performed  in  excess  of  the 
requirements  to  maintain  life;  but  our  aggre- 
gate wealth  is  not  an  exact  or  even  approximate 
measure  of  the  product  of  labor.  Natural 
agents  and  causes  frequently  aid  in  augmenting 
capital  where  it  already  exists;  but  such  aug- 
mentation is  due,  nevertheless,  to  the  impulse 
given  by  labor,  both  past  and  present.  What- 
ever property  of  value  we  may  possess,  is  cer- 
tain to  have  required  a  certain  amount  of  labor 
to  be  expended  in  its  production.  This  labor 
may,  or  may  not,  have  been  performed  by  us, 
but  that  an  equivalent  has  been  rendered  for 
our  possessions,  at  some  time  and  by  someone, 
is  an  indisputable  fact,  and  whether  we  are  the 
fortunate  heirs  to  an  estate,  or  have  found  the 
money,  does  not  alter  the  case. 

To  produce  food  for  our  maintenance  requires 
labor,  though  only  a  small  portion  of  our  time 


282  WHOM  TO  TRUST. 

need  be  sacrificed  in  toiling,  where  mere  exist- 
ence is  the  sole  object  of  life,  as  with  the  ruder 
tribes  of  men  of  to-day,  or  with  our  own  race 
in  its  pre-civilized  state.  The  performance  of 
labor,  like  its  employment,  both  having  for 
their  object  present  and  future  benefits,  is  the 
outgrowth  of  civilization  and  education.  Sav- 
ages do  not  labor  in  the  sense  that  we  do;  i.  e., 
work  to-day  for  benefits  to  be  derived  here- 
after. The  law  of  self-sacrifice — self-sacrificing 
the  present  for  the  future— is,  like  the  moral 
law,  an  evidence  of  a  higher  development, 
whose  threshold  the  savage  has  not  yet  crossed. 
And  in  this  respect  a  wide  divergence  is  notice- 
able among  members  of  the  same  society  or 
class,  and  to  which  is  attributable  the  differ- 
ence in  their  respective  social  conditions. 
"Take  no  heed  of  the  morrow,"  is  accepted 
in  its  literal  sense,  and  the  injunction  is  as 
religiously  obeyed  by  a  large  portion  of  the 
civilized  community  as  by  barbarians,  who 
never  heard  of  it. 

Though  rich  in  everything  which  bountiful 
Nature  could  supply,  this  continent  was  left 
undisturbed  and  undeveloped  in  its  primitive 
grandeur,  waiting  for  the  hand  of  labor  to  make 
the  transformation  from  a  great  wilderness 
to  a  garden  of  plenty  for  eager  and  hungry 
millions.  Less  than  three  centuries  ago,  what 
now  constitutes  the  United  States  had  not  the 
commercial  value  that  many  a  New  England  or 


CREDIT — CAPITAL  AND  LABOR.      283 

Western,  village  boasts  of  to-day;  but  the  won- 
derful change  was  not  wrought  by  a  miracle;  it 
came  through  labor,  and  labor  only. 

The  Indian,  though  lord  of  all  he  surveyed, 
and  his  domain  was  large,  had  no  care  except 
for  immediate  wants.  Game  and  water  were 
within  easy  reach,  and  to  satisfy  hunger 
and  thirst  for  the  time  being  was  his  sole  con- 
cern. Generation  after  generation  found  him 
in  precisely  the  same  condition.  There  was  no 
thought  for  the  morrow,  and  thrift  was  as 
unknown  to  him  as  were  civilization  and  edu- 
cation. Not  willing  to  make  a  present  sacrifice 
of  his  comfort  for  a  future  gain,  he  never  pro- 
duced or  acquired  anything,  and  the  resources 
of  fertile  plain  and  the  earth' s  hidden  treasures 
were  left  unmolested,  waiting  for  him  who 
would  sow  in  the  spring  and  wait  till  harvest- 
time  for  his  wages. 

To  say  that  the  Indian  did  not  labor  would 
be  untrue;  but  his  labor  consisted  in  simply 
providing  for  his  actual  wants,  and  no  more. 
The  Indian  would  rather  work  for  fifty  cents  a 
day  and  receive  his  wages  at  night,  than  to 
work  for  thirty  dollars  a  month  with  deferred 
payment  for  his  toil. 

Labor  performed  in  excess  of  physical  wants 
from  day  to  day,  represents  capital,  but  it  may 
not  assume  the  function  of  capital  in  our  own 
hands.  If,  for  instance,  the  excess  earnings 
are  applied  to  surround  ourselves  with  extra 


284  WHOM  TO  TRUST. 

comforts,  to  the  betterment  of  our  moral,  men- 
tal, and  physical  conditions,  we  have  lost  pos- 
session of  the  tangible  capital  to  be  used  again 
by  us;  but,  the  aggregate  wealth  of  the  world 
has  been  enhanced.  Thus,  we  see,  that  the 
man  who  labors  one  or  two  more  hours  beyond 
actual  necessity,  is  a  creator  of  capital  or 
wealth,  which  is  subsequently  used,  by  him  or 
others,  in  further  production  and  accumula- 
tion. 

The  modern  conditions  of  our  social  and 
industrial  structure  have  brought  about  the 
necessity  of  a  division  into  bodily  and  mental 
labor.  Brain-work,  which  furnishes  the  direct- 
ive power  must  be  classed  as  labor,  as  much  as 
the  work  performed  by  the  hands  and  muscles 
of  the  body.  Both  are  necessary  for  the  suc- 
cessful operations  of  business,  and  when  made 
cooperative,  the  largest  results  are  obtained,  in 
fact,  no  great  results  can  be  achieved  without 
yoking  the  two  forces  together.  The  superior 
workman  is  known  by  the  force  and  quality 
of  mind  that  direct  his  hands,  and,  under 
all  circumstances,  a  combination  of  the  two 
enhances  the  value  of  each.  The  value  and 
potentiality  of  mental  labor  exclusively  de- 
pend on  circumstances.  Where  a  man's  sub- 
sistence must  be  toiled  for  by  himself,  brain- 
work,  or  directive  power  alone,  would  accom- 
plish nothing.  A  certain  amount  of  manual 
labor  must  be  performed  to  result  in  the  pro- 


CREDIT — CAPITAL  AND  LABOR.  285 

duction  of  food  or  anything  else;  but  in  the 
modern  methods  of  doing  business  the  division  is 
not  only  practicable,  but  economical,  and  sub- 
serves the  best  interests  of  all  concerned.  The 
capitalist,  by  reason  of  his  natural  and  acquired 
ability,  gives  sufficient  directive  force  in  a  few 
hours  daily  to  keep  100  or  1,000  hands  em- 
ployed.* He  plans  the  work  while  others  exe- 
cute it,  and  each  one  is  equal  to  his  task 
without  undue  hardship. 

"  Capital  is  the  representative  of  the  product 
of  labor  already  performed."  This  definition  is 
given  by  John  Stuart  Mill  in  his  ' '  Principles 
of  Political  Economy,"  and  applies  equally  to 
our  individual  and  to  the  aggregate  wealth  of 
nations. 

There  is  a  distinction  made  between  wealth, 
capital,  and  money.  The  last  two  are  always 
part  of  the  first,  but  wealth  is  not  always  capi- 
tal, nor  can  all  our  wealth  be  converted  into 
money  at  one  time,  since  we  have  only  about 
one  dollar  in  money  to  every  thirty  possessed 
by  us  in  property;  yet  this  proportion  is  found 
amply  sufficient  to  facilitate  our  exchanges, 
and  that  is  the  only  purpose  which  money 
serves. 

Wealth  is  defined  as  consisting  of  anything 
useful  or  agreeable,  which  nature  does  not 
afford  gratuitously,  and  for  which  some  other 
form  of  property  would  be  given  in  exchange. 

Capital  is  that  portion  of  wealth  devoted  to 


286  WHOM   TO   TRUST. 

productive  uses,  and  employed  in  any  form  of 
industry  for  the  purpose  of  making  profit  or 
interest,  or  otherwise  adding  to  the  principal. 

Money  constitutes  a  considerable  part  of  our 
capital,  but  only  a  small  portion  of  our  wealth, 
and  of  all  property  it  is  the  most  available,  since 
it  affords  instantaneous  command  over  objects 
of  our  desire.  It  represents  the  net  result  of  a 
series  of  transactions  which  are  considered 
completed  only  when  we  have  succeeded  in 
converting  them  into  money.  But  money  is 
not  necessarily  capital,  although  in  this  age  a 
larger  proportion  than  formerly  has  assumed 
that  function;  in  fact,  all  our  money  or  circu- 
lating medium  may  be  considered  to  be  produc- 
tively employed  and  be  termed  capital,  that 
portion  used  for  pocket  or  spending  money 
excepted ,  of  course.  To  illustrate  when  money 
is  not  capital,  suppose  a  case  where  a  man 
deposits  $1,000  in  a  vault  for  safe-keeping. 
Being  withdrawn  from  circulation  and  earning 
or  producing  nothing,  it  ceases  to  be  capital; 
but  it  still  remains  wealth.  It  has  been  robbed, 
temporarily,  of  its  legitimate  function  of  pro- 
duction, but  continues  to  possess  the  quality  of 
being  exchangeable  with  the  utmost  facility  for 
things  desired,  and  is  therefore  in  the  best 
form  to  be  used  with  the  least  inconvenience. 
This  same  $1,000,  the  moment  it  is  released 
from  its  hiding-place  and  used  in  manufacturing 
or  any  business  whatsoever,  whereby  produc- 


CREDIT — CAPITAL   AND   LABOR.  287 

tion  is  effected  or  assisted,  immediately  assumes 
the  function  of  capital  again;  nor  need  it  be 
directly  employed  by  the  owner  himself. 
Lending  it  to  another  on  interest  results  in  its 
productive  employment,  since  no  one  could 
afford  or  be  willing  to  borrow  and  pay  for  the 
use  of  money,  unless  he  expected  to  use  it  and 
make  money  by  the  operation  himself.  Having 
thus  briefly  explained,  intelligibly,  I  hope,  the 
difference  between  wealth,  capital,  and  money, 
we  will  take  up  the  subject  of  capital,  with 
which  we  are  more  especially  concerned. 

Capital  is  the  result  of  accumulation,  and  an 
accumulation  once  made  becomes  a  permanent 
fund  for  productive  operations,  present  and 
future.  We  may  take  as  an  illustration,  the 
case  of  a  small  farmer  under  different  and  dis- 
tinct phases.  One  is  given  a  piece  of  land 
which  he  works,  and  raises  all  that  he  needs 
for  bare  subsistence,  but  no  more.  He  has 
nothing  to  sell  or  to  exchange,  and  one  year 
finds  him  no  better  off  than  its  predecessor. 
The  labor  performed  is  in  exact  proportion  to 
the  bodily  requirements  of  the  man.  No 
accumulation  is  here  effected,  and  capital  is 
not  produced.  This  is  practically  the  case  of 
the  savage.  On  the  other  hand,  the  farmer 
who  labors  more  hours,  and  who  has  a  surplus 
of  product  beyond  his  own  wants  to  exchange 
for  stock,  machinery,  or  for  clearing  or  obtain- 
ing additional  land,  is  a  producer  of  capital. 


288  WHOM  TO  TKUST. 

Having,  by  his  labor  and  industry,  reaped  a 
harvest  which  not  only  yields  the  means  of 
subsistence  for  himself  for  a  year,  but  enables 
him  also  to  provide  for  another  man's  subsis- 
tence, he  has  made  himself  a  capitalist  to  that 
extent.  We  will  suppose,  now,  that  the  farmer 
discovers  on  his  land  a  coal  or  iron  mine.  The 
surplus  product  of  his  previous  year's  labor 
makes  it  possible  for  him  to  employ  another 
man  to  develop  this  natural  resource,  while  he 
devotes  himself  to  acquiring  another  year's  sus- 
tenance to  enable  him  to  prosecute  his  work  of 
development  beyond  the  present  year. 

We  here  have  the  capitalist,  and  we  see  that 
he  has  made  himself  such,  simply  by  the  per- 
formance of  labor  in  excess  of  his  personal 
needs.  He  has  accumulated  a  fund,  consisting 
of  food  in  this  case,  which  represents  to  him 
and  others  an  exchange  value  either  for  acquir- 
ing other  objects  or  other  men's  labor.  The  in- 
ference would  be  that  the  producer  of  food  is 
the  originator  and  principal  source  of  all  capi- 
tal and  wealth,  and  that  labor  in  other  depart- 
ments, not  directly  productive  of  food,  owes 
the  possibility  of  its  existence  to  the  tiller  of 
the  soil,  and  this  is  logically  true. 

In  the  animal  and  insect  world  we  find 
"  capitalists "  at  certain  seasons  of  the  year, 
and  in  some  instances  at  all  times.  The  squir- 
rel collects  what  he  deems  a  sufficient  supply  of 
acorns  to  carry  him  through  the  winter;  the 


CEEDIT — CAPITAL  AND  LABOR.  289 

bee  and  the  ant  show  prodigious  energy  in  pro- 
viding for  future  wants.  We  call  this  instinct; 
but  it  were  well  for  a  portion  of  mankind  were 
they  to  exchange  man's  higher  estate  of  reason 
for  simple  instinct. 

Most  of  us  can  earn  enough  in  four  hours  per 
day  to  sustain  life  and  procure  the  absolute 
necessaries.  Some  are  content  with  this;  others 
are  willing  to  labor  a  little  more  for  what 
special  indulgences  it  may  provide;  but  those, 
only,  who  labor  with  a  desire  and  for  the  pur- 
pose of  having  a  surplus  left  out  of  their  earn- 
ings, become  capitalists.  We  often  hear  it  said 
that  our  millionaires  have  not  performed  labor 
or  rendered  an  equivalent  in  labor  for  their 
possessions;  in  fact,  that  no  labor  at  all  has 
been  performed  for  it.  If  this  were  true,  and 
capital  or  wealth  was  the  creation  of  a  mental 
process,  simply  and  purely,  the  more  of  such 
creative  geniuses  this  country  could  boast  of, 
the  better  it  would  be,  most  assuredly.  But  the 
fact  is,  that  not  one  dollar  of  capital  exists  that 
does  not  represent  an  equivalent  in  work  per- 
formed by  someone,  whether  it  be  in  the  hands 
of  the  laborer,  the  farmer,  the  merchant,  or  the 
millionaire.  The  men  who  live  by  their  ' '  wits ' ' 
or  who  make  speculation  their  business,  live  on 
the  produce  and  the  labor  of  their  fellow-men. 
While  it  does  not  appear  to  be  right  that  one 
man  should  be  allowed  to  live  on  the  fruits  of 
another's  efforts,  it  is  yet  a  fact  of  human  life, 

19 


290  WHOM  TO  TRUST. 

as  much  as  that  the  sun  shines  on  the  just  and 
unjust  alike.  Notwithstanding  the  wailings  of 
a  certain  discontented  class,  the  laws  governing 
commerce  and  society,  and  man's  intercourse 
with  man,  are  nevertheless  fixed  and  immutable, 
so  far  as  the  individual  is  concerned,  adjusting 
themselves,  however,  to  the  varying  conditions 
and  improvement  of  the  race,  and  in  this  respect 
only,  differing  from  the  laws  of  Nature. 

Reverting  to  the  subject  of  speculators  and 
men  living  by  their  "  wits,"  as  we  say,  they  are 
not  producers,  and  in  no  sense  can  they  be  said 
to  be  a  helpful  addition  to  our  industrial  forces. 
They  live  on  what  others  have  already  pro- 
duced, and  aim  to  appropriate  as  much  of  this 
product  of  others  as  their  ingenuity  or  superior 
sagacity  enables  them  to.  They  can  live  and 
thrive  only  where  the  earnings  and  savings  of 
others  are  in  process  of  accumulation.  Stanley 
has  not  reported  finding  them  in  his  African 
tour,  and  not  until  others  have  gone  there  and 
reared  the  industrial  structure,  will  the  specu- 
lator be  induced  to  bring  his  special  talent 
to  that  market.  Capital  must  first  have  exist- 
ence, before  men  can  live  on  each  other  or  be  of 
any  use  to  each  other,  and  only  as  man  advances 
in  the  social  scale  so  that  he  will  work  and 
save,  will  he  become  a  potent  factor  in  his 
own  welfare  and  contribute  to  that  of  the  com- 
munity. 

To  quote  from  the  Political  Economy  of  Mr? 


CREDIT — CAPITAL  AND  LABOR.         291 

Mill:  "All  capital  originally  is  the  result  of 
saving,  and  a  saving  once  made,  becomes  a 
permanent  fund  to  be  used  in  endless  produc- 
tive operations,  each  operation  being  self-sus- 
tained and  paying  a  profit  besides."  To  enjoy 
the  comforts  and  luxuries  of  life;  to  be  inde- 
pendent— in  short,  to  be  in  the  possession  of 
wealth-  is  the  goal  of  our  ambition;  but  how- 
ever ardently  we  may  desire  these  things,  the 
goal  is  not  reached  by  simply  wishing.  We 
must  work  and  save. 

"  Credit  is  not  equivalent  to  the  creation  of 
capital,  but  it  helps  to  make  capital  more  pro- 
ductive by  being  transferred  to  hands  more 
competent  to  employ  it  efficiently."  Credit  is 
not  an  independent  factor,  although  it  appears 
that  in  the  minds  of  many,  credit  is  the  equal 
of  capital  and  capable  of  performing  all  its 
functions  independently.  But  not  one  dollar 
of  credit  can  be  given  unless  a  saving  and 
accumulation  to  that  extent  have  been  effected 
and  have  tangible  existence  in  what  is  termed 
capital. 

The  function  of  credit  is  not  production,  but 
to  aid  production  and  distribution.  This  it 
does,  and  to  this  is  owing  the  greater  remuner- 
ation enjoyed  by  capital  where  the  conditions 
in  a  community  warrant  a  liberal  dispensation 
of  credit.  Not  all  men  nor  even  all  owners  of 
capital  are  qualified  by  education  or  inclination 
to  engage  in  productive  operations,  but  they 


292  WHOM  TO  TRUST. 

seek  to  employ  their  capital,  nevertheless,  and 
by  becoming  partners  or  lenders  and  joining 
forces  with  men  of  experience  and  energy,  they 
are  enabled  thus  to  reap  part  of  the  profits 
arising  from  such  combinations.  But  it  must  be 
borne  in  mind  that  the  same  dollar  can  be  used 
in  but  one  operation  at  a  time.  For  one  man  to 
give  another  part  of  his  capital  is  an  uncondi- 
tional surrender;  to  lend  is  a  conditional  sur- 
render or  transfer;  but  in  each  case  the  original 
owner  has  diminished  his  power  of  production 
in  the  exact  ratio  that  the  borrower' s  has  been 
increased.  From  a  superficial  view  it  might 
appear  that  although  A  has  parted  with  his 
capital  to  B,  he  can  use  the  securities  received 
from  B  and  not  be  hindered  in  engaging  in 
business  himself.  But  this  only  changes  the 
personality  of  lender  and  borrower,  for  B  would 
then  be  using  C's  capital  instead  o?  A's.  Now, 
in  our  actual  business  transactions  the  person- 
ality of  lender  and  borrower,  creditor  and 
debtor,  is  constantly  changing ;  but  a  first 
principle  governs  each  and  all — at  some  point 
every  credit  transaction  must  be  represented 
by  capital  and  be  based  upon  it. 

We  can  readily  see  that  industry  is  limited  by 
capital,  and  this  limitation  holds  equally  true  of 
credit,  although  it  might  seem  that  our  credit- 
giving  capacity  was  greater  than  our  capital. 
For  instance,  when  A  buys  $10  worth  of  sugar 
and  sells  it  at  $11  on  credit,  his  credit-giving 


CREDIT — CAPITAL  AND  LABOR.  293 

capacity  would  seem  to  exceed  the  capital  in- 
vested. But  right  here  we  must  not  lose  sight 
of  a  very  important  factor  in  the  creation  of 
capital,  namely,  labor.  The  dollar  added  to 
the  original  investment  represents  A's  labor  as 
distributor  or  agent. 

There  is  and  has  been  at  all  times  and  among 
all  classes  of  men,  not  excepting  legislators  and 
even  prominent  business-men,  an  erroneous  con- 
ception of  the  nature  of  credit,  it  being  looked 
upon  as  a  creation  possessing  inherent  powers 
and  attributes,  and  capable  of  performing  func- 
tions which  it  can  only  acquire  by  a  transfer  of 
the  thing  it  represents,  viz.,  capital.  The 
inflationists,  previous  to  1879,  comprised  a  very 
respectable  faction,  both  in  numbers  and  gen- 
eral intelligence.  They  insisted  that  the  nation' s 
promise  to  pay  was  all-sufficient  without  refer- 
ence to  its  ability,  based  on  property  (national 
wealth)  to  secure  or  ultimately  redeem.  In 
holding  to  this  theory  they  manifestly  ignored 
the  fundamental  law  governing  the  simplest 
business  transactions.  A  nation's  claim  to 
credit,  like  that  of  an  individual's,  must 
always  be  based  on  property;  otherwise  this 
claim  will  not  be  recognized,  whatever  may  be 
decreed  by  legislative  enactments.  O  ur  gold  and 
silver  certificates  pass  current  because  we  have 
confidence  in  the  assurance  that  the  govern- 
ment has  gold  and  silver  coin  or  bullion  in  its 
treasury  vaults.  While  the  notes  are  in  circula- 


294  WHOM  TO  TRUST. 

tion  we  know  that  the  property  they  represent 
is  held  intact  for  the  security  of  the  holder, 
and  this  furnishes  the  basis  of  our  confidence 
in  and  ready  acceptance  of  them. 


MERCANTILE  AGENCIES.  295 


MERCANTILE  AGENCIES. 

Since  the  mercantile  agency  is  the  direct  out- 
growth and  is  so  inseparably  connected  with  and 
dependent  for  its  support  on  our  credit  system, 
and  since,  also,  it  has  come  to  be  recognized  as 
an  indispensable  adjunct  to  present  conditions 
and  methods  of  doing  business,  it  may  not  be 
amiss  to  give  a  brief  outline  of  its  origin,  growth, 
and  present  status. 

The  Mercantile  Agency  System  was  first  con- 
ceived and  put  into  operation  in  New  York 
City  about  the  year  1837.  The  great  commer- 
cial crisis  of  that  year  led  certain  parties  con- 
versant with  mercantile  affairs  and  the  credit 
system,  as  it  then  existed,  to  attempt  the  intro- 
duction of  a  method  whereby  the  mercantile 
interests  might  find  better  protection  and  be 
surrounded  with  greater  safeguards.  With 
this  end  in  view,  and  backed  by  leading  houses 
for  whose  special  benefit  the  scheme  was  more 
directly  devised,  a  bureau  for  collecting  infor- 
mation was  opened  by  a  Mr.  Church.  This  was 
the  beginning  of  our  present  Mercantile  Agency 
System,  and  up  to  that  time  nothing  had  been 
attempted  in  this  direction. 

The  larger  houses  in  those  days  employed 
commercial  travelers,  who  managed  to  get 
around  to  their  customers  once  or  twice  a 
year;  but  the  object  of  these  annual  or  semi- 


296  WHOM  TO  TRUST. 

annual  visits  was  more  to  cultivate  acquaint- 
ance and  strengthen  the  relationship  between 
buyer  and  seller.  An  estimate  of  customers, 
both  as  to  character  and  responsibility,  was 
thus  formed,  and  their  limit  of  credit,  which 
we  take  to  have  been  almost  unlimited,  was 
established.  Though  good,  so  far  as  it  went,  this 
plan  was  not  alone  expensive,  but  thoroughly 
inadequate  to  the  needs  of  the  times.  Commerce 
was  growing  and  extending  in  every  direction, 
and  new  applicants  for  credit  were  constantly 
pouring  in  from  every  quarter,  and  of  these 
nothing  was  or  could  be  known,  of  course.  To 
trust,  or  not  to  trust,  however,  must  be  decided 
at  once.  There  was  no  agency  to  consult  or 
telegraph  to  make  use  of  while  the  customer 
was  being  entertained  and  shown  through  the 
stock.  Under  such  circumstances  these  were 
both  momentous  and  difficult  questions  to 
decide;  but  as  every  condition  creates  and 
develops  its  own  defense  and  safeguard,  so 
the  merchants  of  those  days  were  equal  to 
the  emergency  by  means  of  another  school  of 
training,  differing  entirely  from  our  present 
methods. 

Most  of  us  can  remember  when  it  was  the 
custom  of  merchants,  from  all  parts  of  the 
country,  to  repair  to  the  metropolis  once  a  year, 
at  least,  for  the  two-fold  purpose  of  settling  up 
and  buying  new  stocks.  This  custom  brought 
the  New  York  merchant  in  personal  contact 


MEKCANTILE  AGENCIES.  297 

with  his  customers,  both  old  and  new,  and 
developed  in  him  a  faculty  for  determining 
character  and  judging  men  and  human  nature, 
that  has  been  largely  lost  to  modern  business 
science,  and  which  constituted  the  essence  of  a 
thorough  business-training  fifty  years  ago. 

Looking  back  to  this  and  still  remoter 
periods  in  our  commercial  history,  the  law  of 
compensation  is  brought  to  our  minds  with  full 
force.  We  enjoy  great  advantages  to-day,  and 
would  not  willingly  give  up  the  least  of  our 
conveniences;  but  we  have  surely  made  a  sacri- 
fice for  them,  to  which  the  old-time  merchant 
could  never  become  reconciled.  A  customer  in 
those  days  stood  in  the  light  of  a  friend — even 
a  warm  personal  friend.  Buyer  and  seller, 
after  their  relationship  was  once  established, 
did  not  meet  simply  for  what  they  could  make 
out  of  each  other.  The  Southern  or  Western 
trader  combined  pleasure  with  business  when 
making  his  annual  visit  to  the  metropolis,  and 
meeting  his  business  friends  periodically  was 
his  vacation  and  recreation.  The  merchant  in 
turn  received  him  with  the  most  cordial  hand- 
shake and  generous  hospitality,  for  which  New 
York  merchants  were  renowned.  A  customer 
then,  once  secured,  could  be  relied  on  for 
continued  patronage.  There  was  real,  gen- 
uine friendship,  and  this  was  the  foundation 
on  which  the  integrity  and  honor  of  buyer 
and  seller  mutually  rested.  Nor  was  this 


298  WHOM  TO  TRUST. 

mutual  confidence  often  willfully  abused. 
Laws  for  the  collection  of  debts  were  on  the 
statute  books,  and  in  some  States  were  quite 
severe,  but  as  regards  any  benefit  to  the  creditor, 
they  were  practically  a  dead  letter.  We 
find  in  the  literature  of  that  period,  as  late  as 
1847,  a  suggestion,  emanating  from  some  of  the 
larger  houses  in  New  York,  that  the  laws  for 
the  collection  of  debts  be  abolished  altogether, 
and  that  dependence  be  placed  entirely  on  the 
honor  and  honesty  of  the  buyers.  To  collect 
by  process  of  law  from  a  trader  in  the  Territo- 
rial governments  of  the  then  wild  West,  was,  of 
course,  impracticable  from  a  business  stand- 
point, if  not  impossible.  The  Dry  Goods  Rec- 
ord of  that  time  also  favored  the  repeal  of  the 
collection  laws,  and  its  arguments  were,  that  in 
the  absence  of  any  legal  redress  for  the  cred- 
itor, a  higher  moral  responsibility  would  be 
developed  in  the  buyer  by  trusting  entirely  to 
his  moral  sense,  and  having  it  so  understood. 
Although  the  laws  remained  in  force,  the  argu- 
ment was  not  altogether  illogical  for  those 
days,  though  now  it  would  be  impracticable. 
Yet  we  do  find,  even  to-day,  in  the  liquor  busi- 
ness, for  instance,  credit  given  on  a  large  scale 
to  dealers  residing  in  States  where  the  collec- 
tion of  liquor  bills  can  not  be  enforced  by  law. 
Such  is  the  confidence  of  man  in  man,  that 
credit  will  flourish  even  without  any  protec- 
tion from  the  law. 


MERCANTILE  AGENCIES.  299 

Taking  up  again  the  origin  of  the  agencies, 
we  find  the  purpose  of  its  promoters  to  have 
been  to  collect  and  obtain  information  of  the 
financial  standing  and  responsibility  of  traders 
doing  business  with  New  York  merchants,  and 
it  was  mainly  in  the  interest  of  a  few  of  the 
larger  houses  that  the  agency  undertook  the 
work.  The  idea  having  much  in  it  to  recom- 
mend it,  the  list  of  patrons  soon  increased,  and 
with  it,  the  scope  and  value  of  the  institution 
were  increased  also. 

The  first  reference-book  was  issued  about  the 
year  1840.  While  the  list  of  names  furnished 
was  not  large,  the  information  was  reliable.  It 
was  not  so  much  an  effort  for  quantity  of 
material  as  of  quality,  and  in  this  respect  the 
value  of  the  agency  was  not  enhanced  by  time 
and  experience.  Competition  presently  entered 
the  field,  and  this  may  be  held  responsible  for 
the  subsequent  degeneracy  and  drifting  away 
from  the  original  plan  and  high  resolve  of  its 
promoters.  The  success  of  the  first  agency 
soon  attracted  others  to  the  field,  some  short- 
lived and  others  to  stay,  and  ere  long  there  was 
keen  competition  for  patronage,  and  efforts, 
not  to  out-do,  but  to  out-show  each  other  were 
the  result.  Instead  of  giving  the  public  honest 
and  conscientious  work,  it  resulted  in  lists  with- 
out regard  to  reliability  of  statements.  As  long 
as  only  one  was  in  the  field,  the  most  reliable 
service  was  sought  to  be  given,  and  competition 


300  WHOM  TO  TKtTST. 

can  not  be  said  to  have  worked  beneficially  in 
this  instance. 

The  promoters  originally  sought  to  supply 
only  authoritative  information,  when  informa- 
tion was  given  at  all,  and  this  policy  should 
have  been  rigidly  adhered  to,  for  it  is  not 
quantity  that  business-men  want,  if  it  is  at  the 
expense  of  reliability.  No  report  at  all  is  bet- 
ter than  an  incorrect  one,  and  if  the  agencies 
would  follow  this  suggestion  more  uniformly, 
they  would  give  vastly  better  service  to  the  busi- 
ness community.  Like  a  general  storekeeper, 
who  tries  to  keep  everything  because  the  nature 
of  his  business  implies  supplying  every  want  of 
his  customers,  so  the  agencies  undertake  to 
answer  all  inquiries  to  satisfy  subscribers,  thus 
appearing  to  give  them  service  for  their  money. 

Yet,  considering  how  much  they  undertake 
and  how  much  is  asked  of  them,  it  is  surprising, 
that  they  render  as  acceptable  service  as  they 
do,  especially  when  we  consider  the  difficulties 
under  which  they  labor.  First,  it  is  incompe- 
tency  and  want  of  business  knowledge  and  tact 
of  the  correspondents.  Second,  carelessness 
and  indifference  of  correspondents  to  their 
work,  in  which  they  have  no  especial  interest, 
and  which  they  perform,  in  a  large  measure, 
gratuitously.  Thirdly,  personal  favoritism  or 
prejudice  is  apt  to  sway  the  correspondent's 
mind,  consciously,  sometimes,  and  unconsciously 
at  others,  and  so  a  long  list  of  difficulties  might 


MERCANTILE  AGENCIES.  301 

be  enumerated  which  operate  against  the 
agency.  Local  reporters  for  agencies  rarely 
get  paid  for  their  services,  except  in  an  indirect 
way.  Even  when  under  direct  pay,  it  is  not 
remunerative  enough  to  command  great  talent 
or  much  time. 

But  notwithstanding  all  the  shortcomings  of 
the  system,  and  with  all  its  glaring  defects,  it 
is,  nevertheless,  a  permanent  institution  with 
the  American  business-public,  and  has  come  to 
stay.  Notably  among  the  agencies  of  to-day, 
R.  G.  Dun  &  Co.  and  Bradstreet  may  be  cited, 
and  as  money-making  institutions  they  have 
been  very  successful,  and  this  necessarily  proves 
their  popularity  and  usefulness.  But  we  cheer- 
fully give  them  credit,  also,  for  constantly 
improving  their  service  and  of  appropriating 
a  fair  share  of  their  immense  earnings  toward 
the  perfecting  of  their  systems.  Infallibility 
is  not  one  of  the  things  chargeable  to  them  to 
any  alarming  extent,  but  that  the  reports  of 
to-day  are  a  great  improvement  over  those  of 
twenty  years  ago,  or  even  ten,  is  cause  for  much 
encouragement.  Within  the  last  few  years  the 
agency  has  been  accorded  a  place  in  the  busi- 
ness community  of  this  country  at  least,  and 
by  reason  of  this  recognition,  they  have  been 
able  to  assume  a  more  independent  attitude. 
The  more  we  recognize  their  right  to  existence, 
the  greater  will  be  their  usefulness. 

A  tolerably  recent  innovation  of  the  agencies 


302  WHOM   TO   TKUST. 

is  the  right  claimed  by  them  to  ask  for  "  Signed 
Statements,"  and  the  requests  are  complied 
with  much  oftener  than  might  be  supposed.  A 
statement  made  over  the  signature  of  a  dealer 
is  not  necessarily  correct,  and  while  the  esti- 
mates of  figures  need  be  taken  with  some  allow- 
ance, they  are,  yet,  much  better  than  the  purely 
guess-work  (in  many  instances  unavoidable) 
of  the  reporters.  Where  a  signed  statement 
of  the  assets  and  liabilities  is  given,  the  only 
task,  and  a  comparatively  easy  one,  is  to  have 
it  corroborated. 

The  idea  of  ' '  Signed  Statements  "  is  a  good 
one,  and  the  creditor  class,  for  whose  benefit 
they  are  obtained,  have  a  right  to  expect  them. 
A  mercantile  report  of  this  kind,  furthermore, 
has  a  legal  status.  The  party  giving  it  does  so 
for  the  purpose  of  obtaining  credit  on  the  repre- 
sentations made  by  him,  and  in  case  of  a  false 
statement,  the  law  attaches  a  criminal  account- 
ability to  such  misrepresentations;  that  is, 
obtaining  goods  under  false  pretenses.  No 
debtor  can  afford  to  make  himself  liable  under 
this  head. 

The  history  of  the  Mercantile  Agency  shows 
a  determined  opposition  to  it  on  the  part  of  the 
public,  and  only  in  the  last  twenty  years 
or  so  has  popular  prejudice  been  removed. 
A  little  of  it  lurks  even  now  in  remote  locali- 
ties. The  very  nature  of  the  institution  and 
its  inquisitorial  functions  naturally  arouse 


MERCANTILE  AGENCIES.  303 

antagonism,  and,  strange  to  say,  for  it  is  para- 
doxical, the  free  citizen  of  the  United  States  is 
the  only  one  on  the  face  of  the  globe  who  tol- 
erates it.  It  is  a  purely  American  institution 
and  nourishes  only  on  American  soil.  Aside 
from  a  few  branch  offices  established  in  the 
principal  European  cities  by  Bradstreet  and 
Dun  &  Co.,  they  are  not  recognized,  and  these 
branches  exist  only  for  the  information  they 
can  give  of  American  houses. 

Europeans  do  not  take  kindly  to  anything  of 
an  inquisitorial  nature.  The  Church  and  State 
have  always  monopolized  and  claimed  the  right 
to  pry  into  their  affairs,  and  they  graciously 
submit,  but  they  are  averse  to  any  additional 
encroachments  on  their  privacy. 

In  England,  banks  furnish  their  customers 
with  information  concerning  the  standing  of 
parties  in  trade.  A  customer  of  a  bank  is 
privileged  to  make  inquiry  through  it,  and 
banks  obtain  from  each  other  such  information 
as  may  be  wanted.  In  Europe,  banking  insti- 
tutions are  excrutiatingly  exacting,  and  in  the 
matter  of  obtaining  and  giving  information 
they  would  naturally  be  very  cautious  and 
painstaking,  so  that  reports  received  from  this 
source  would  be  quite  reliable.  We  do  not 
apprehend,  of  course,  that  banks  are  eager  to 
lend  themselves  to  this  kind  of  business,  and 
only  in  special  cases,  and  as  special  favors  to 
very  good  customers,  do  they  perform  this  office. 


304  WHOM   TO   TRUST. 

The  growth  and  efficiency  of  the  Mercantile 
Agency  in  the  United  States,  as  compared  with 
its  status  in  other  countries,  is  due  to  natural 
causes  and  more  favorable  conditions.  Credit 
here  is  dispensed  with  a  liberal  hand,  and  to 
people  very  distantly  removed  from  the  sellers, 
but  this  does  not  signify  that  credits  are  made 
hap -hazard  and  without  some  knowledge  of 
the  buyer's  commercial  standing.  And  here 
the  agency  comes  in  as  a  medium  between 
buyer  and  seller.  In  round  numbers  there  are 
over  1,000,000  business  firms  in  the  United 
States,  and  the  agencies  furnish  information  of 
them  all,  and,  even  if  incorrect  in  many  in- 
stances, they  still  give  us  an  idea  of  their  com- 
mercial standing,  where  otherwise  we  could  not 
even  make  a  guess.  The  assistance  which  they 
render  in  facilitating  business  intercourse  is, 
therefore,  of  great  and  unquestionable  benefit. 

We  stated  at  the  beginning  that  the  mercan- 
tile agencies  were  the  outgrowth  of  our  credit 
system.  It  may  also  be  added  that  our  present 
widely  extended  credit  system  is  largely  due  to 
the  labors  of  the  agencies,  and  it  is  no  longer  a 
disputed  question  that  they  supply  a  want, 
and  are  indispensable  to  the  business  public, 


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